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Online Holiday Sales Lift ITV Outlook

1/13/2002 7:00 PM Eastern

What's the difference between Jennifer Aniston's Sweater and a John Malone T-shirt? Only one of them is also the name of a rock band.

And you can't buy apparel with Dr. Malone's picture on it — even (or especially) in the National Cable & Telecommunications Association Web Store (http://www.cable2002.com/store/index.shtml).

The band called "Jennifer Aniston's Sweater" was formed somewhere in the Los Angeles area last year by interactive-media dreamers. They had glommed onto the constant hype about interactive TV's ability to let viewers buy anything they see on the tube.

The most frequently used example of television commerce was "the sweater that Jennifer Aniston is wearing on Friends."

During the Irony Age, that buying option — with all of its Freudian implications — became the basis of many serious studies, including financial analyses of whether the actress would get residual commissions on sweaters sold during syndication.

There's no word on how, or if, the band of the same name is faring. But t-commerce, a mainstay of the broadband economic equation, has lost its luster.

Fueled by cutbacks at RespondTV, Commerce.TV Corp. and other ventures in this sector, there's a sudden sense that interactive shopping doesn't work.

That's a premature judgment. Forecasters are sticking with their predictions that television commerce will outpace the cable industry's new darling, video-on-demand. Some estimates put t-commerce revenue at $14 billion within 10 years — double the VOD revenue stream.

Look no further than last month's e-tailing successes for a glimpse of what interactive commerce can become in a revamped retail environment. While overall holiday retail sales were dismal, Web shopping actually prospered beyond expectations. The first wave of data points to online-commerce tallies in the $12 billion to $15 billion range, well beyond the 10 percent rate of growth that was expected.

America Online claims its members spent $7.2 billion. Microsoft Corp. said its MSN Internet shops generated $5.6 billion during the holidays (those figures include travel and other non-tangible sales).

As we begin to sift through the season's extraordinary e-tailing data, an image of shoppers who are becoming very comfortable with interactive buying emerges. For example:

  • Amazon.com customers ordered 37.9 million items.

  • Fifty-five percent of Americans did some of their holiday shopping online, while 2 percent did all their shopping at Web stores, according to Deloitte Touche Tohmatsu.

  • Average Web orders increased to $126.77, up 13 percent from last year, according to BizRate.com.

  • Total electronic retailing purchases topped $390 per shopper, according to the Pew Internet and Family Life Project.

  • Internet shopping sites attracted nearly 50 million unique visitors, up 57 percent from a year earlier, Jupiter MediaMetrix found.

  • Yahoo! Inc.'s Yahoo! Shopping sales jumped 86 percent from 2000.

Beyond these spot reports, Pew's comprehensive study (http://www.pewinternet.org/reports/toc.asp?Report=54) portrays an even more promising outlook for on-screen shopping.

For the first time this year, women made up the majority of Web gift-buyers, as 58 percent of Internet shoppers were female. There were far fewer complaints about ordering and, especially, fulfillment this year, which shows that online merchants who survived last year's shakeout figured out how to handle the seasonal deluge.

Most significantly, the Pew study notes that "more people claimed to have saved time and money by purchasing goods online, and fewer complained about or worried about the potential hassles."

Electronic shopping's rosy appeal stems largely from the new shape of the e-tailing industry. Brand-name merchants, from Wal-Mart to Lands' End, have emerged with significant Web stores, adding to consumer confidence in online ordering.

Alliances, such as the one between Amazon.com Inc. and Circuit City Stores Inc., offer online ordering with the convenience of neighborhood store "returns" or exchanges.

Of course, cable's linear video-shopping channels also did well during the holidays, as customers shunned conventional shopping centers. But the biggest untold TV shopping story may be taking shape at QVC's British operation, which is already offering interactive broadband merchandising options.

Details are being held close to the vest, but sources indicate ITV has captured a disproportionate share of sales, based on its availability. All of which raises the question of where U.S. interactive shoppers will head as they become more comfortable with screen shopping.

Interactive marketers continue to struggle with dilemmas about "rich media" presentations and security — all supposedly embedded in the broadband solution.

Certainly USA Networks Inc. CEO Barry Diller — with his multiple transaction businesses (travel, ticketing, e-tailing) and his HSN experience — has seen the value of the e-shopping model. He's also long been preaching its viability.

Cablevision Systems Corp. is also very keen on the opportunity. It's dedicated a sizable team within its large interactive group to shopping projects (ancillary to the company's own retail off-shoot, The Wiz.). Various units at AOL Time Warner Inc. have had a checkered record in retailing.

That's why Jennifer Aniston's sweater (the apparel, not the band) may be the right answer to the wrong question. T-commerce is not merely about ordering products "seen on TV," although that is certainly part of the equation.

There is a much more complicated formula for the new retailing. It involves merchandising, merchant reliability and interactive availability. It is also subject to the whims and fads that are inevitably part of that process.

As holiday online sales demonstrate, e-shopping has moved beyond recreational retailing and closer to the mainstream of American buying.

And as for those Malone T-shirts — would anyone buy them, online or at the three-for-$10 outlet store?

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