Self-regulation Key to E-retail Legitimacy - Column

Brandweek, April 19, 1999 by Elissa Matulis Myers

The biggest immediate step we need to see is the establishment of synergy between Internet retailing (the efficient cataloging, ordering and shipping of products) and the direct response television business (which can supply the emotional hook). As Internet shoppers become more familiar with the medium, it will take bigger and better and more innovative sites to satisfy their interest. Sites with audio and video streaming will become more common, and Internet retailers will have to incorporate that streaming to remain competitive. The flat model of an Internet site as a "catalog page" will disappoint, and the incorporation of persuasive video will become critical. The development of "good" TV is a highly refined and complex art form incorporating a whole skill set not typically in the resume of an average Internet site developer.

What's more, TV has the profound ability to tackle the No. I problem that Internet retailers face: driving traffic to the site. ERA members in the DRTV business buy 250,000 30-minute spots every month on broadcast TV affiliates and national cable networks. That's an astonishing 125,000 hours of television time every month. A single one-minute spot incorporated into each of those shows to drive consumers to related Internet sites represents over 2,000 hours of direct television exposure. A Web address-overlay represents 125,000 hours of time.

The sheer convenience of Internet-TV networking technology can bolster the efficiency of this medium exponentially. Simply enabling consumers to click, eliminating the task of making a phone call from the required consumer action, can drive a massive lift in sales. Worldgate, a leader in delivering the Internet to television via set-top cable boxes in partnership with MediaOne, reports that with the pay-per-view experience, if a consumer can click to order a movie, rather than having to make a phone call, response increases from about 30% of households per month to more than 100%.

More than simply efficient and compelling site design, competency in the management of back-end operations management is critical. The single biggest complaint that sullied the otherwise bright holidays for Internet sales this past year was that Internet retailers were overwhelmed by the volume, and hadn't adequately prepared, operationally, to handle the massive order volume and fulfillment. According to Stewart Siegel, senior vice president of Westchester, N.Y.-based IQVC, Internet sites depend on managing the erratic spikes of the direct response business, versus the old school of servicing a terrestrial middleman. "We are in the business of shipping packages to people, rather than pallets to stores," Siegel says.

Another critical competency of the Web TV experience is the ability to harvest the potential in a customer base: managing the upsell, continuity sales; data-mining, cross selling. The initial Internet "order" should be only the beginning of the business relationship. Successful Internet retailers will know how to tastefully exploit the opportunities and increase the profitable margins of a sale.