I CA Supermarkets Case 2016

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BAB1012C
Babson Worldwide
BAB274
DECEMBER 2014
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ICA: Changing the Supermarket Business,

One Screen at a Time
At the end of 2007, after several rounds of testing the effectiveness of its brand new
digital signage initiative, the ICA Group needed to decide whether it should install monitors
throughout all its many stores. The tests had been designed with the goal of providing a clear
answer about whether this initiative was worthwhile, yet the results revealed conflicting
information. Customers reported not enjoying their shopping experience as much with digital
signs in place, yet sales data suggested they had bought more than when digital signs were not
present. Managers were torn: Should they invest the money to install digital signs in all their
stores?
tC
The ICA Group
No
As a large, profitable retail group, ICA ran approximately 2,400 of its own and retailerowned stores in Sweden, Norway, and the Baltic region. The group comprised ICA Sweden, ICA
Norway, and Rimi Baltic. It also included ICA Bank, which offered financial services to clients of
its retail stores, and ICA Real Estate, which provided the company with properties on which to
build retail stores. Prior to 2013, Royal Ahold N.V. and Hakon Invest AB owned the group; but
in March 2013, Hakon Invest AB bought all the shares and changed the name to ICA Group.
Consolidated 2012 net sales reached SEK 96,863 million. According to CEO Per Strmberg in
the Annual Report and Sustainability Report 2012,1 the year 2012
http://reports.ica.se/ar2012en/Materiale/Files/ICA+annual+report+and+sustainability+report+2012_opt.pdf
accessed November 2014.
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This case was prepared by Krista Hill, Assistant Professor of Management at Bridgewater State College,
Anne Roggeveen, Professor of Marketing at Babson College, Dhruv Grewal, Professor of Marketing at Babson College,
and Jens Nordflt, Assistant Professor of Marketing, Stockholm School of Economics. It was developed as a basis for
class discussion rather than to illustrate effective or ineffective handling of an administrative situation. It is not
intended to serve as an endorsement, source of primary data or illustration of effective or ineffective management.
Copyright 2014 Babson College and licensed for publication to Harvard Business School Publishing. All rights
reserved. No part of this publication can be reproduced, stored or transmitted in any form or by any means
without prior written permission of Babson College.
This document is authorized for educator review use only by Sakkthivel A. Manickam, HE OTHER until February 2017. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
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DECEMBER 2014
ICA: Changing the Supermarket Business, One Screen at a Time
was another successful year for ICA, despite the economic concerns in the market. ICA
Sweden continued to outperform the market as a whole. We saw fine performances by
our private labels, Cura pharmacies and ICA non-foods. Rimi Baltic developed well, as
did ICA Bank, which launched an interesting new package of mutual funds. ICA Real
Estate was stable and generated satisfactory operating income for the year. Another
achievement is that our Swedish sourcing and logistics processes are now certified
according to quality and environmental standards.
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ICA operated multiple store formats in Sweden: (1) ICA Nra, a convenience-type store
meeting consumers daily retail needs; (2) ICA Supermarkets, mid-sized stores typically located
in cities and carrying a wide range of products; (3) ICA Kvantum superstores, usually located
outside of cities and supporting large, planned purchases; and (4) MAXI ICA hypermarkets with
full product ranges including groceries, clothing, and housewares. Recently the group had added
Cura pharmacies and ICA-to-go. Cura pharmacies were located within larger ICA stores, and
ICA-to-go sold nutritious, portable meals. Independent retailers owned and managed many
stores, though all had entered into agreements with ICA Group to receive support in areas such
as logistics, retail development, and marketing communications.
tC
The grocery market in Sweden was substantial, worth several hundred billion SEK. It
was served by various competitors of ICA, including Axfood, Coop, and Bergendahls. However,
ICA stores dominated the market, holding a 36.7% share. Strong competition existed in other
channels in Sweden including home delivery services and restaurants. Growth opportunities
were notable. Urbanization in Sweden had occurred faster than in any other European country.2
Prominent market trends included an interest in health, environmental awareness, and a focus
on convenience. Because Swedes spent approximately 12% of disposable income on food, they
were generally price-sensitive and readily checked food prices on their mobile devices or
computers.
No
To function in such a market environment, the ICA Group relied on extensive research to
explore and test the effectiveness of new ideas and strategies. In its long-standing relationship
with the Center for Retailing at the Stockholm School of Economics, the ICA Group continually
tested new retailing ideas by using large-scale quasi-experiments. As one researcher from the
Stockholm School of Economics noted, unlike in many traditional retail firms that depended on
store managers to communicate information up the hierarchy, at ICA, research plays a major
role, greater than many know or think about. They want to make this [process] theoretical and
get theory. Fredrik Holmvik, ICAs media manager, agreed with this assessment, explaining
that Basically all new ideas we try to test and analyze before the launch/no launch decision.
Research is the foundation for more extensive tests or gives us the toolbox for simpler tests. It
also gives us new angles/ideas to test. 3
Do
In 2005, when increasing competition and a sluggish market resulted in a 2.3% decrease
in net sales, the Group sought new ideas to boost sales. Digital signage in-store video screens
that displayed pertinent contentwas just beginning to gain traction with retailers. Kalle Fahlin,
head of media development, suggested the Group consider using digital signage, arguing that
ICA TV could broadcast promotions or other in-store information to shoppers. This practice
2
Magnusson, Erik (2012), The fastest urbanization in Europe, Sydsvenska Dagbladet, April 8 2012.
July 3, 2013
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DECEMBER 2014
would enhance the in-store environment and help stores promote certain products. (See
Exhibit 1.) Although the idea of digital signage was not totally new, it was innovative to ICA
and its franchisees. According to Holmvik, Many liked the idea of communicating with the
shopper in-store versus the consumer at home; the response was positive from that angle. But
then we had people wondering if it would work or not. Specifically, might the signage
overwhelm or overstimulate shoppers?
Digital Signage
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The digital signage industry, part of the broader billboard and sign manufacturing
industry (in which revenues were an estimated $12.8 billion in 2012), grew notably in the early
2000s, mainly due to increasing demand for non-traditional means of communication in
response to the growing presence of online retailers. Overall, the digital signage industry was
fragmented with small businesses functioning in regional niche markets. However, several firms
held significant influence within the industry, including Daktronics (with the largest market
share at 3.8%), Young Electric Sign Company, Brady Corporation, Clear Channel Outdoor
Holdings, and Lamar Advertising Company. These providers typically targeted key businesses in
industries such as gas stations and convenience stores, department stores, billboard and
outdoor advertising, fast-food restaurants, and coffee/snack shops.
tC
Instead of traditional vinyl or plastic sheets, digital signage used high-resolution, digital
video screens or LEDs, in sizes ranging from small screens (.5 foot 1 foot) to large screens (50
feet 140 feet) to huge wrap-around (quarter-mile 3 feet) arena displays. Signs combined
high-tech software and hardware, including screens, servers, routers, transponders, mounting
equipment, wiring, and antennas. Displays could be controlled by PCs/servers, so software
represented a relatively minimal capital expenditure.
No
To create value for customers, digital signage promised to improve the shopping
experience. For advertisers, it offered an additional source of revenue; and for stores, its
purpose varied with the type of store. Clothing stores might use music videos to enhance their
environments; big box stores might present how-to videos to provoke interest in a new product;
restaurants might use digital signs to display a menu; and service providers (e.g., corporate
buildings, universities) might adopt digital signs for information displays. In addition, digital
sign content could be classified into three types: active, passive, or interactive. Active content
engaged onlookers directly and called them to action, with the goal of creating interested,
informed consumers. Passive content remained part of the background scene, designed to
enhance the atmosphere and possibly draw customers into stores. Finally, interactive content
combined these forms by offering interactive features while simultaneously displaying
background imagery or video.
Do
Across these various purposes and types, digital signage offered consistent advantages
over traditional analog signs. It enabled quick turnover and distribution of content, and it
allowed varying content (e.g., promotions, entertainment, news, product advertisements) to be
displayed in the same space. Profit potential increased with digital signage, because a store
could send multiple advertising messages in the same space, cut back on printing costs, and set
individual-level time and location targets to specific audiences at any moment.
Researching and Evaluating ICA TV
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DECEMBER 2014
In line with its tradition of researching every new idea before implementing it, ICA
conducted three rounds of testing in 2006 and 2007 to determine the in-store efficacy of digital
signage, which it designated ICA TV. The first series of experiments examined the main effects
of digital displays on customer attention, emotions, attitudes, and behavior in large stores. The
second round replicated the first but in smaller stores. As one researcher explained:
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We used a Latin square design in all three experiments to rule out calendar effects, and
to rule out that a certain effect only held for a specific store. This means that we had
some experimental stores and some control stores in one period and then switched them,
so that the experimental stores became control stores and vice versa in a second period.
Of course we did not dismount any TV screens, but just turned them off when the store
was used as a control store.
Most comparisons therefore referred to experimental stores (i.e., screen on stores) versus
control stores (i.e., screen off stores).
Test 1
tC
The first round of testing, undertaken in Maxi and Kvantum stores, sought to answer
several questions, including whether customers noticed the displays and liked them, and
whether customers believed they experienced more positive shopping experiences as a result.
Some group members feared the screens might distract or scare customers away. Thus, another
important question of interest was whether customers were more likely to purchase a product
located near a digital display.
No
In each store, approximately fifty 42-inch digital signs were installed in six zones. (See
Exhibit 2.) Different content was developed for each zone. To monitor customer responses, the
ICA Group placed researchers throughout the stores and also relied on cameras and sensors to
measure whether customers approached or avoided digital displays. Self-scanning devices held
by customers themselves logged the time they spent in the store, the time spent at checkout, and
their average spending. Furthermore, researchers conducted approximately 2,500 interviews
with customers to ask them about their experiences and how long they believed they waited in
the checkout line. The behavior of almost 34,000 customers was analyzed in terms of average
time and money spent in stores. This information was calculated from data gathered by the
handheld devices customers carried and used to scan products as they placed them in shopping
carts. Approximately 12,000 in-store observations came from researchers who noted whether
shoppers viewed the end-of-aisle displays that were complemented by digital signage, stopped at
them, or purchased from them. Finally, nearly 60,000 mechanical observations using cameras
as sensors were obtained showing customer behavior as they approached digital displays.
Do
For the basic question whether customers noticed the digital displays, the results
revealed that screens were noticed: 35% of customers reported seeing a digital sign in at least
one of the zones. The visibility rates were higher in Kvantum stores and at checkout. (See
Exhibit 3.)
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DECEMBER 2014
Next, to examine whether customers approached or avoided the digital displays, the
experiment featured a long table holding bananas, with two smaller screens behind it. One
screen was always on, and the other was always off. The screens were counterbalanced so that if
a screen was on one day, it was off the next, and vice versa. These results showed that customers
tended to shop closer to the on screen than to the off screen. Specifically, a lead researcher
recognized, Even when the screen closest to the perimeter was turned off, a significant number
of customers walked by it to pick bananas closer to the screen that was turned on.
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For retailers, a more important question was whether sales would improve if they
supplemented end-cap displays with digital displays. To the delight of ICA, when end-of-aisle
displays were accompanied by a digital sign, sales increased significantly for 17 product
categories across manufacturer brands and private labels. Researchers also discovered a sales
increase for items on an end cap positioned just beyond one featuring a digital sign when the
second end cap contained a related product.
Once shoppers reached the checkout line, their average perceived waiting time was two
minutes and 15 seconds; their actual average waiting time was only one minute and 45 seconds.
That is, customers believed they waited longer than they actually did, regardless of whether they
shopped in a store with digital signage. However, for customers who indicated they liked digital
signage, its presence decreased their perception of waiting time. Furthermore, regardless of
perceived waiting time, average spending on products in the checkout area increased by more
than 50% when screens were turned on. The final and most staggering result was the large
increase in average time and money spent in stores. An average shopping trip without TV
screens lasted approximately 30 minutes. Shopping time expanded by 10% when screens were
turned on. The same was true for the average amount of money spent. From a baseline of
approximately U.S. $70 per customer, average spending increased slightly more than 10%.
No
tC
Despite these extremely positive effects of digital displays on sales and customer
behavior, the effects on customer attitudes and emotions suggested different outcomes.
Curiously, customers indicated their experience seemed more negative than usual, reporting
they had less interest in returning to the store, approaching sales staff, or exploring the store, in
contrast to customers in the control stores without digital displays. (See Exhibit 4.)
Test 2
Do
Test 1 offered interesting but perplexing results. Customers said they were not enjoying
the digital display experience, but they also stayed in the store longer and bought more. With
Test 2, the Group wanted to understand the increase in customer buying behavior and
determine what was causing customer dissatisfaction. After five months of running digital
signage, ICA turned off all displays for several weeks. When displays were switched on, they
were only switched on in half the number of stores. These stores became the treatment stores,
whereas the other half became the controls. The pattern was reversed halfway through the test:
treatment stores turned off displays and became controls, whereas control stores turned on
displays to become treatment stores.
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DECEMBER 2014
With this shift, ICA also examined how customers reacted to two types of programming:
inspiration, which featured photos, recipes, and tips in an attempt to improve store ambience;
and be/price, which was informational and described prices, deals, loyalty cards, available
bonuses, and other relevant details. The research team believed that If the negative attitude
shift was due to the screen itself, the content would not matter. Hence, no matter what the
content was, merely using the digital sign would yield the negative attitude shift. However, if the
negative attitude shift were due to the content, we would get different results depending on the
way we presented our communication on the screens.
This test offered three results.
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1. The attitude shift changed direction. Approximately nine months after initial installation
of displays, consumers expressed more positive attitudes in response to digital signs that
were turned on rather than off.
2. The sales increase realized when digital signs were on remained significant.
Test 3
tC
3. The two types of digital content elicited results the ICA Group had predicted, according
to shopper survey responses. Shoppers in stores featuring inspiration content believed
they would spend more, whereas shoppers who saw be/price content reported they
would not change their purchases, compared to purchases they would make in a control
store with no digital displays. However, the sales transaction log showed the opposite
pattern: Sales went up with promotional messages and down with ambience-improving
images, on average by a small but significant amount. Thus, both retailers and customers
were incorrect in their predictions for behavioral effects brought about by different types
of content. (See Exhibit 5.)
No
The ICA Group worried about extrapolating to smaller stores the results from these two
tests conducted in larger stores. Therefore, it ran Test 3 to examine effects of the displays in
smaller stores. In these environments, the Group inserted fewer screens per store to avoid a
sense of clutter. As in Test 1, findings revealed that customers noticed the screens; shoppers
even seemed to notice the signs more. They offered comments such as, There are many digital
screens in the store today, suggesting that they strongly sensed the presence of digital signs.
Do
Yet other outcomes were reversed in the smaller stores. Consumer attitudes were more
positive, and sales decreased. For example, when consumers were asked how positively they
perceived a store overall, on a scale of one (very negative) to 10 (very positive), those shopping
with screens on rated a store as significantly more positive (M = 8.33) than those shopping with
screens off (M = 8.03, p = .003). The digital signage had positive sales effects on adjacent endcap displays in larger stores; but in smaller stores, the number of sales to consumers who looked
at an end cap without signage after viewing one with signage fell by approximately one-quarter.
Summary and Remaining Questions
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DECEMBER 2014
Do
No
tC
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The ICA Group had done a thorough job testing the effects of digital signage in both large
and small store formats. Intriguingly, researchers found that customers disliked screens in large
stores but increased spending of both time and money when screens were present. In small
stores they found the opposite effects: Customers appreciated stores more with screens present,
but purchases dropped. Thus, the ICA Group had spent months running multiple tests in
various stores, and it had invested in adding displays to a substantial sample of stores. But was it
any closer to a choice? Should it implement ICA TV chain-wide?
No
tC
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Exhibit 1
ICA Group Digital Signage
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Source: Photos by author Anne Roggeveen with permission of company.
Exhibit 2
Location of Digital Signage in Stores, Test 1
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DECEMBER 2014
Deli
12 screens
Produce
Perimeter
68 screens
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12 screens
End caps
5 st pelare (Kvantum)
3 skrmar
Frsljning/intkter
-Vara-pris
-Produktnyheter
Checkout
tC
46 screens
Entrance
2 screens
Do
No
Source: Diagram prepared by the company.
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DECEMBER 2014
Exhibit 3
Percentage of Customers Noticing Digital Signage
Location in Store
Stores
Fruits and
Deli
Aisle
Before Checkout
At Checkout
Line
Line
Vegetables
38%
24%
39.8%
34%
Haninge
24%
37.9%
23.8%
28.4%
Ahus
19.8%
53%
61%
33%
58.8%
Norrtalje 30.3%
Total
28%
41%
35.7%
61.8%
36.9%
44.5%
36%
42.4%
40.5%
56.3%
44.4%
48.74%
39.84%
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Solna
Total
36.96% 45.64% 36.5%
Note: These percentages refer to the percentages of customers who noticed the signage in these locations
throughout the store; total refers to the total percentage of customers who noticed any signage in the
store.
Do
No
tC
Source: Provided by the company.
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DECEMBER 2014
Exhibit 4
Comparison of Customer Attitudes: Screens On Versus Screens Off
Off
On
Significance
6.11
6.19
.335
3.68
3.06
.000
1.57
1.77
.088
5.78
5.57
.100
This is a positive place to talk to store staff.
5.29
4.80
.000
I would avoid looking around or exploring in this store.
2.28
2.51
.090
I like this store environment.
6.06
6.03
.762
Today I am forced to be in the store.
5.12
5.06
.701
I often make unplanned purchases in this store.
4.60
3.62
.000
This is a place to avoid store staff and talking to them.
2.17
2.56
.004
This is the kind of place to spend more than planned.
5.39
4.74
.000
There are many televisions in this store.
3.43
3.68
.128
Today I am in the store because I like it.
4.70
3.80
.000
I like to shop in this store.

I would like to have more time to look around this store.
I do not want to return to this shop.
tC
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Today I am focused on getting things done.
No
Note: Items that differed significantly are presented in bold font.
Do
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DECEMBER 2014
Exhibit 5
Customers Reactions to Different Content, Test 2
Inspirational
I like to shop in this store.

I would like to have more time to look around this shop.
I do not want to return to this shop.
Significance
6.05
6.23
.065
3.18
3.39
.247
1.76
1.83
.577
5.08
5.32
.102
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Today I am focused on getting things done.
Be/Price
5.19
5.40
.124
I would avoid looking around or exploring in this store.
2.09
2.32
.098
I like this shop environment.
5.69
5.93
.045
Today I am forced to be in the store.
4.50
4.84
.053
I often make unplanned purchases in this store.
4.62
4.17
.008
This is a place to avoid store staff and talking to them.
2.48
2.59
.485
This is the kind of place to spend more than planned.
4.98
4.83
.256
There are many televisions in this store.
3.64
3.20
.031
Today I am in the store because I like it.
4.63
4.54
.553
tC
This is a positive place to talk to store staff.
No
Note: Items that differed significantly are presented in bold font.
Do
12

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ICA: Changing the Supermarket Business,

The ICA Group

Researching and Evaluating ICA TV

Summary and Remaining Questions

Source: Photos by author Anne Roggeveen with permission of company.

Source: Diagram prepared by the company.

36.96% 45.64% 36.5%

Source: Provided by the company.

This is a positive place to talk to store staff.

I would avoid looking around or exploring in this store.

I like this store environment.

Today I am forced to be in the store.

I often make unplanned purchases in this store.

This is a place to avoid store staff and talking to them.

This is the kind of place to spend more than planned.

There are many televisions in this store.

Today I am in the store because I like it.

I like to shop in this store.

Today I am focused on getting things done.

Note: Items that differed significantly are presented in bold font.

Source: Provided by the company.

I like to shop in this store.

Today I am focused on getting things done.

I would avoid looking around or exploring in this store.

I like this shop environment.

Today I am forced to be in the store.

I often make unplanned purchases in this store.

This is a place to avoid store staff and talking to them.

This is the kind of place to spend more than planned.

There are many televisions in this store.

Today I am in the store because I like it.

This is a positive place to talk to store staff.

Note: Items that differed significantly are presented in bold font.

Source: Provided by the company.

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