Dive Brief:

• Walgreens reportedly has been testing Internet of Things-enabled smart displays installed in cooler doors in a Chicago store that are capable of showing targeted advertising to shoppers, according to a Wall Street Journal story.

• The screens, sensors, cameras and other technologies, including face detection, that make up these systems can sense the likely age of an approaching shopper, which products they've picked up and other clues that allow it to display what it computes is an appropriate ad for that shopper.

• These systems, which are being expanded to more Walgreens stores this month, were developed by Cooler Screens, a Chicago-based company whose co-founders include a former executive of Walgreens Boots Alliance and the former CEO of Argo Tea, among others, the story stated. Microsoft also is an investor.

Dive Insight:

Retailers have been cautious thus far about deploying Internet of Things technologies and systems. Retail IoT applications represent a potentially huge market, but one with perhaps a long curve, as companies are taking their time figuring out what IoT can do for them, and how well.

In recent years, they have used it mostly in ways that don't put the technology directly in front of customers, instead leveraging it in the supply chain as part of an inventory tracking architecture or for management of manage in-store environmental systems, for example. Walgreens is among those that have pursued these types of IoT projects, having worked with Riptide IO several years ago on IoT for energy management.

These applications affect store operations and can be ingredients in improving the shopping experience, but this latest Walgreens test is an example of how an IoT-enabled system can be used in customer-facing ways, particularly for in-store marketing and advertising. It's a test of technology but also of whether or not more dynamic and focused in-store ads can help spur a purchase.

It's an interesting and promising application, though Walgreens and the rest of the sector probably will not know how effective it can be until it is tested and used in more stores and with more customers. After an initial couple months, though, Walgreens is expanding the test to a handful more stores in San Francisco, New York City and Seattle, according to the Journal story — a promising sign.

Part of the reason for the caution could be that Walgreens wants to make sure customers are comfortable with the notion that data about them is being collected and processed by the Cooler Screens system, although the Journal story makes clear that the system leverages anonymous demographic metadata, and does not personally identify customers.

Ultimately, a large part of the success of this kind of system will have to do with how enthusiastically it is embraced by advertisers, and Cooler Screens reportedly already is working with Nestle, MillerCoors and other big-name brands.

Following a failed bid to merge with Rite Aid, and facing a potential competitive shake-up in its core pharmacy business, Walgreens lately has embraced a number of new technology initiatives aimed at redefining its in-store shopping experience and catalyzing new revenue. Just recently, the retailer tapped Zebra Technologies to provide mobile devices that store associates can use in-store to better facilitate checkout and merchandise pick-up, among other functions.

The test with Cooler Screens also fits in with that push. Walgreens is still in the early stages with some of these technologies, and the extent to which they can strengthen the retailer against future competitive market disruption remains unknown for now. But things could be worse for Walgreens — at least its not Rite Aid.