Convergence Draws Cable to T-Commerce

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As the industry begins to eye incremental revenues from electronic commerce over digital cable, today's home shopping channels are quietly enhancing their back-end infrastructure to retain their dominant position in the category.

Executives at the older home-shopping channels were somewhat philosophical about the impending arrival of interactive-television-technology launches via digital set-top boxes.

"It could be argued that HSN was the first form of interactive television," Home Shopping Network president Mark Bozek said. "We've been in the interactive business for 20 years."

QVC also boasts a long history of selling its wares electronically. "We've been an e-commerce company for 14 years," iQVC vice president of operations Steve Hamlin said, initially selling over the television and then adding the iQVC Web site.

The lines between the television networks and their Web sites are starting to blur somewhat as the programmers set up simulcasts between the two media for their more popular fare.

For example, HSN recently hosted a simulcast with Sylvester Stallone's wife, Jennifer Flavin, both on-air and online at HSN.com.

Television helps to reinforce the brands of the Web sites and drives traffic there.

ValueVision International Inc. not only promotes its own site, but recently struck co-branding partnerships with several electronic retailers-such as Petopia.com, wine.com and ROXY.com Inc., a consumer-electronics Web site-to simulcast events hosted by the e-tailers.

ROXY.com is advertising its new Tuesday-night primetime ValueVision programming in its mail-order catalog and on its Web site, chief marketing officer Donna Driscoll said. The company also plans to develop a consumer promotion to link the TV show and Web sites.

"The biggest roadblock for a lot of the dot-com companies is getting exposure," Bozek said.

HSN plans to extend its brand beyond its own television network by launching a new direct-response unit that will produce live, interactive infomercials to air on other networks. Because the infomercials will include Internet components, Bozek said, they will look less staged and more interactive.

Bozek said HSN expects to launch the new direct-response unit by June. The new division will produce 30-minute infomercials and two-minute spots selling products also aired on HSN. "They'll drive traffic to our Web site," he added.

QVC gains revenue by offering consumers both the Web site and the television as channels from which to make purchases. "It's important to understand that this is not cannibalization," Hamlin said, because some customers have preferences for where they'll buy, and others will buy more products-and more frequently-if given additional options.

When customers want to be entertained, they're more apt to watch QVC on television, for example. But if they want to purchase flowers for Secretary's Day while they're at the office, the Web site would be more convenient, Hamlin said.

Television still offers more entertainment value than the Internet can, ValueVision president of marketing Cary Deacon said. Viewers enjoy interacting with the on-air hosts, and they tend to buy more when the network broadcasts from a colorful location.

"We quadrupled our normal sales volume when we went live from Italy," Deacon said. "We believe our consumers are tuning in for some form of entertainment."

Even with high-speed access, the smaller screen on a computer makes a Web site somewhat less engaging from a standpoint of pure entertainment, he added.

ValueVision also wants to make sure that its television viewers who don't have Internet access won't feel left out in the days of convergence.

"Today, 40 percent of our customers are wired," he said. "We're trying to be respectful of the six out of 10 who are not on the Internet. You don't want to give benefits that the nonwired folks can't get."

TV DRIVES TO WEB

By creating a sense of trust and familiarity over time, the television personalities on the home shopping networks can actually help to drive viewers to the Web sites, some believe.

"We can speak to the issue of privacy a great deal through our television channel," Bozek said. "We talk and educate our customers. As long as you bring them with you, you're OK. If you don't, they won't go with you."

Leaving as many options open as possible helps. Customers concerned about privacy may still visit the Web site, but use the telephone to place an order, for example.

"Customers who buy via the telephone while using the Internet buy 30 percent to 40 percent more on average than the online-only customer," Deacon said. "When you're talking to a live human being, you can ask questions about other products."

ValueVision plans to launch a television-commerce test with Wink Communications Inc. and Time Warner Cable, in which digital-cable subscribers can use their remotes to buy products, Deacon said. "The option to pick up the phone is still there," he added.

The shopping channels'Web sites offer distinct benefits over television-only models, both for the consumer and the companies.

According to Bozek, 40 percent of the people who buy from HSN.com had never bought from HSN on television.

Driscoll said ROXY.com would use its partnership with ValueVision to learn from the early days of convergence. She added that ROXY.com will look at how much overlap there is between consumers using the Web site and the television show, how much those customers flow back between the two channels and whether certain price points sell better on one medium than the other.

"The Internet provides easy comparative [pricing] tools that the television doesn't," Driscoll said. "But with the television, there's more opportunity to play into emotions."

Commerce.TV-which provides set-top application software to enable t-commerce-believes many of today's e-tailers will change their Web-site suffixes from dot-com to dot-TV as the industry moves to interactive television, president Matthew Kay said.

There are two ways to sell products over t-commerce, Kay said. One is program-synchronous, where the merchandise is directly related to the programming content. The second is a dedicated-channel application set up by the cable operator, "like a Web site on television," he added.

Program-synchronous applications-such as selling a CD during a show on VH1-"capitalize on what television is good at: tapping into emotions," Wink executive vice president of sales and business development Allan Thygesen said.

Wink has developed interactive-television technology that allows a viewer to conclude a t-commerce transaction within the confines of a 30-second commercial spot, "so you can get back to watching TV," he said.

Of course, the home shopping channels aren't the only networks eyeing t-commerce. Programmers on both the cable and broadcast sides are testing the waters through Web sites and partnerships with interactive-technology companies in the hopes of gaining incremental revenues by selling home shopping services of their own.

WANNA BUY A SWEATER?

There are still many questions about just what kind of t-commerce applications the average television viewer will adopt.

"What it will not be is somebody watching Friends and then being able to click on a button to buy Jennifer Aniston's sweater," Bozek said. "That is pure rubbish. I don't think anyone will want to watch Friends to buy a sweater. They don't want to be pitched her sweater. Those kinds of assumptions are misguided."

From experience, Bozek has learned that to sell a product successfully on television, it has to be sold in great volume. Still, commodity products that are widely available in traditional bricks-and-mortar stores typically don't sell well on television, he said.

Products that sell successfully on television are the ones that have demonstrable features, such as apparel, cooking tools, camcorders, computers and high-quality jewelry, Bozek said.

Knowing what products sell on television came to the top shopping networks after years of experience, Hamlin said, as did the ability to sell those products over the air. "There's a difference between broadcasting and selling," he added. "It's difficult to learn."

And while the traditional home shopping channels could gain from the exposure and credibility for the entire t-commerce category that will come once other networks join the fray, those programmers also worry that the industry could be tarnished if companies jump into the category without the proper infrastructures.

Bozek believes most cable and broadcast entertainment networks do not have the brand authority to sell products directly to their viewers.

"They don't have the back-end, nontelevision piece of it," Bozek said, referring to the call centers and distribution systems needed for proper product fulfillment. "It takes real money to be successful."

When merchandise doesn't get delivered as promised by new e-commerce players, Hamlin said, "That hurts all of us." Many consumers who tried to order products via the Internet over the last holiday season abandoned e-commerce because they had bad experiences, Bozek said, adding that HSN delivered 99.6 percent of its packages within five to seven days.

"There's a real danger in damaging the relationship the networks have with their viewers," Bozek said. "The difference is that our viewers are our customers. The minute you enter into that relationship, there's a potential for those network brands to be tarnished."

While interactive-technology companies are eager to see digital set-top boxes deployed, the home shopping channels don't see a big push toward consumer adoption of those interactive services anytime soon.

"The problem with a lot of the set-top technologies is that they have very limited distribution," Deacon said, adding that there is also an issue of competing interactive-technology standards.

Universal standards are more important for national, program-synchronous services than for the walled-garden sites set up by individual operators, Thygesen said.

"You want everyone to play with the same rule book so you can get a consolidated stream of responses, and so you have some agreement on how revenue splits work," he added.

Bozek said it remains to be seen exactly how revenues will be shared among cable operators, programmers and technology vendors in the days of interactive television.

"If you split this thing too many ways, it's not going to work," Kay said. "At some point, you have to evaluate: Is there enough oxygen in the sale to prevent everyone from turning blue?"

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