Last month, we looked at the technological revolution and how this will affect electronic retailers. New technology is translating into an increasing number of channels vying for audiences. This not only is giving consumers more choices – a seemingly infinite number of niche channels – but is also empowering consumers with more control over what they watch.
With the introduction of new filters that can weed out commercials and automatically store programming for later consumption, consumers are dictating what they watch and when they watch it. What will this revolution mean for those used to the traditional electronic retailing industry?
Economic models unravel. This multiplying of channels will drive the demand for content development higher than ever. Programmers will scramble to fill airtime with more entertainment that fits their target demographic. And because all of these new and existing channels will be fighting for the same number of impressions, the traditional mass advertising economic models will begin to unravel. Smaller niche channels increasingly will need to turn to electronic retailing as a way of funding content. But how will that content evolve?
Emerging trends in content. At the risk of oversimplifying, content has always fallen into two broad categories: entertainment and information. Entertainment has traditionally held the lion’s share of programming time on television. However, as more news shows and niche educational channels have developed, that balance is shifting. Several emerging trends will affect the future of content:
• Information as entertainment. This trend has started to emerge with channels such as The History Channel, Discovery, Animal Planet and Home and Garden. When given alternatives, many consumers choose content that can be thought of as informational or educational.
• More narrowly defined niches. The big area for growth is where the content provides very specific information for very specific audiences. More cable channels will be devoted strictly to narrowly segmented audiences; for example, a single sport, such as golf, or a single interest, such as cooking. These types of special interests lend themselves to bundling program content with the opportunity to purchase products – content that speaks to a consumer’s specific interests and products that fit with that content.
• Home shopping will adapt. Home shopping also will get more entertaining and may one day be widely recognized as its own form of entertainment. We may do electronic shopping in the same way we visit a boat show or make a shopping trip to the local mall. It is as much entertainment as it is a serious buying spree. Home shopping already is becoming more categorical, with the “Diamond Show” or the “Computer Show.” That trend is likely to grow. The notion of a QVC or HSN being the single shopping channel will seem passé. You will have categories and niche players.
• Content and commerce will converge. Finally, content and commerce will become even more intertwined and inseparable. A traditional network will not be able to draw and keep the same mass audience. Electronic retailing and entertainment will have to blend to get into homes and capture the attention of viewers. Pure entertainment will move toward selling, and electronic retailing will move toward entertainment.
New business models will be created. Almost inevitably, as entertainment values go up, effectiveness in generating revenue will decline, at least in the short run. Time devoted to entertaining viewers is time that can’t be spent selling a product.
And if revenues decline and cost per order rises, electronic retailers will have to adapt. That will spur creation of new economic models for the industry. Some possibilities:
• Traditional sponsorship of infomercials. A few sponsored infomercials already have been run. In these, an infomercial that sells one product also includes more traditional advertising from the maker of a compatible product. Why not include ads for boats in an infomercial selling a fishing lure? Especially if it helps pay the freight.
• New business relationships between marketers and media outlets. If there is a glut of media available and it is harder for electronic retailers to make a profit, why not spread the risk by sharing revenue in return for lower media rates?
• Long-term thinking. Initially, as content becomes more entertaining, revenue will be lower. But as the entertainment content draws a following, sales will eventually rise due to the accumulated awareness and loyalty built into a brand. Why not tolerate lower revenue now for a shot at higher revenue later?
Information is king. One thing that is demonstrated over and over again is consumers’ desire for information that helps them make buying decisions. That desire is why “buyers’ guide” magazine issues sell out, and it has been the underpinning of electronic retailing from the start. No technological revolution will change that. If anything, all the choices to come simply will feed an insatiable appetite for more information.
And rich and plentiful information sells products.
The key to the future for electronic retailers will be finding ways to make the information about their products entertaining and compelling enough to get past the inevitable gatekeeping that consumers will be able to employ.
Electronic retailers have always been in the content business. They need to realize this and expand. People in the entertainment business need to think not only about traditional advertising and pay-per-view but also about commerce. To prosper in this new environment, the content of electronic retailing campaigns will have to change as well.
• Lee Frederiksen is founder and chairman of The Frederiksen Group, Falls Church, VA.