Alf's Articles

Slicing And Dicing The World Of Slice And Dice

by Alf Nucifora

Its early history conjures up snake oil salesmen and fast talking TV spielmeisters hawking the latest in miraculous kitchen gadgets and household remedies. But, the reality is, electronic retailing is today a $256 billion industry, encompassing television home shopping (QVC, Home Shopping Network), infomercials and Internet e-commerce. During two decades of consistent growth, electronic retailing has attracted the traditional players as well as more recent entrants such as the pharmaceutical industry (GlaxoSmithKline, Pfizer), automotive brands (Pontiac,Volvo, Lexus) and traditional package-goods names (Procter & Gamble, Pantene, Swiffer).

The infomercial world is populated by the likes of Guthy-Renker Corporation, the largest infomercial company in the U.S., with over $1 billion a year in sales. It also includes a significant number of prominent companies and brands, e.g. Time Life, that use 60-second to 2-minute direct response television commercials to market their products. In all, the "offline" portion of the electronic retailing world (where sales are driven by traditional direct response broadcast advertising) constitutes an approximate $25 billion of business.

The largest and fastest growing sector of electronic retailing occurs on the Internet where behemoths such as Amazon and LL. Bean ply their trade. For that reason, the Electronic Retailing Association (formerly the National Infomercial Marketing Association) has reconfigured its mission and scope to acknowledge the industry's explosive growth, particularly within the online channel. Notes Jeffrey Knowles, ERA Chair-Elect, "Electronic retailing is a complex industry; it is not simply buying media time and advertising a product. A successful campaign uses multiple channels of electronic retailing - television, Internet, radio - in many cases to drive retail sales as well as home shopping."

Why the explosion?

The cause rests squarely with the customer who has sought greater convenience and access to information. Says Knowles, "Consumers want information within their own timeframe, whether it's at work or at home. Electronic retailing provides unlimited amounts of information, detailed explanation and demonstration about the product and how it works. It really fills in where brick-and-mortar retail leaves off." To Knowles' point, a significant number of retail environments lack qualified salespeople. As a result, consumers can obtain far more information about a product from their television sets or their computer than they can from a sales clerk in a retail store, with the bonus that they can access the information and buy the product at their leisure.

The increasing consumer acceptance of the Internet as an e-commerce channel has also helped flame the industry's growth. As an example, QVC, although initially and TV-only player, has seen its Internet business grow to approximately $800 million from an initial $30 million entry point.

However, the major benefit to the electronic retail marketer lies in accountability. Says Knowles, "When the consumers respond to a direct response television commercial by picking up the telephone or, in the case of the Internet, logging-on to place an order, the marketer is able to measure response, gather demographic information and see accountability in a way that general advertising is incapable of delivering." And Knowles is right. The industry is brutal when it comes to performance and metrics, an understandable frame of mind, given the steady growth in media cost and the growing corporate focus on the marketing ROI. Electronic retailing's measurability places it squarely on the firing line with every commercial or campaign. After all, the sales meter never lies.

The Future

Globally, electronic retailing is growing at as fast a pace as in the US. Infomercials are now on the air in more than 100 countries. Britain alone offers 38 live shopping channels. But Asia, particularly China, represents the marketplace that everyone wants to capture, currency considerations not withstanding.

For the marketer, the revelation has been the industry's ability to develop and market products, not just for the short-term, in-and-out, quick-kill, but for a long-term sustainable brand life. After a decade on-air, Guthy-Renker's ProActiv Solution is now one of the largest-selling acne treatments in the world. Bowflex and Total Gym have proven conclusively that brands can be successfully built and sustained with direct response television, and can build on that momentum to migrate to the traditional retail brick-and-mortar environment. As usual, it was the prescient Barry Diller of QVC who best appreciated electronic retailing's potential. As traditional advertising continues on its slow, inexorable journey towards marketplace clutter and consumer indifference, and as the Internet becomes the information and buying staple of the consumer's life as it inevitably must, look to electronic retailing to fill the remaining void.