E-Retailing in the New Millennium

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The modern electronic retailing industry is about 16 years old, dating from the removal of broadcast time constraints by the Federal Communications Commission in 1984. Since that pivotal event, the industry has constantly evolved as new technology, much of it behind the scenes, has been adopted and exploited.


Those in direct response television have speculated for years on what the future of the industry will look like. Well, the future is here.


What does the future look like, and how will it affect electronic retailers?


Technology equals ever-increasing capacity. The boom in technology has had a profound effect on electronic retailing. The increase in bandwidth has provided consumers with an array of channels from which to choose. Digital television and the merging of computers (and/or computer-like appliances) and television also have changed the way we do business.


In late 1996, the FCC cleared the way for digital television by assigning unused broadcast channels for the service and setting a timeline for the phase-in of the new service. By 2006, conventional analog television will be gone, under the FCC plan, replaced by DTV.


What will it mean? For one thing, broadcasters (and cable systems) will be able to deliver high-definition television over the new, higher-capacity digital channels, along with compact disc-quality sound. HDTV will offer incredibly sharp pictures, in large screen sizes.


Even more exciting, at least for electronic retailers, is that when broadcasters aren't sending HDTV signals, the unused transmission capacity can be used to send multiple, non-HDTV signals. As more and more cable companies offer DTV, it will vastly increase their capacity to carry signals.


The amount of television time available to electronic retailers will increase dramatically.


The arrival of DTV also will accelerate the much-heralded convergence of computers and television. The implications of this merger are widespread, especially when combined with the Internet and high-capacity digital telephone and cable connections.


DTV and convergence will remove the most important limiting factor for electronic retailing - capacity. Capacity may, in a practical sense, become infinite. It will allow for the creation of a nearly unlimited number of new channels, all hungry for revenue and programming. And when capacity is no longer the issue, emphasis will shift to economics. How will these new channels hold an audience when the choices available to consumers are so vast? How will they support themselves, especially while they're trying to attract the ratings that will bring in big advertising accounts?


Electronic retailers support niche content. It's been said that electronic retailing is the mother's milk of new cable networks. Emerging networks have always been supported first by electronic retailers that don't focus on ratings and share points. And as it has done with cable, electronic retailing will play a crucial role in DTV, especially as these new channels, mostly offering niche content, struggle to find an audience.


The expansion of channel capacity has created, and expanded, niches in the cable industry. This trend will continue. We already have The Golf Channel, The Outdoor Channel and Country Music Television. One day it may be the Fly Fishing Channel, The Embroidery Channel and Model Railroad Television. Electronic retailers are already figuring out ways to identify and exploit the niche markets this will create.


The price: audience attention. While it sounds like the new technologies will be heaven for electronic retailers, there will be a stiff price to pay for all benefits.


Digitizing television signals and merging broadcasting and cable with the Internet will give consumers a tremendous amount of control over what enters their homes. If consumers can electronically filter the signals they receive and weed out commercial messages before they appear on the screen, what will electronic retailers have to do to get permission to enter?


If viewers can store an evening's worth of broadcasts on their computers overnight, then watch at their convenience, will the calls that now come into call centers while an infomercial airs be spread over days or even weeks? What effect will all this have on media buying?


It appears that broadcast electronic retailers will have to learn some lessons from their Internet counterparts. Like Web sites, infomercials will have to be able to motivate viewers to respond (visit) and reward those who do.


Lee Frederiksen is founder and chairman of The Frederiksen Group, Falls Church, VA.

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