UK TV Retail Is Struggling According To Forrester
Interactive television retail (tRetail or t-commerce) is in trouble in the UK, according to a new report from Forrester Research. The company says that return on investment (ROI) is currently a distant possibility and that dozens of retailers are chasing tiny revenues.
“British retailers’ dissatisfaction with current tRetail revenues is wholly justified,” said Forrester’s director of research, Fraser Pearce. “The combined costs of more than 50 retailers massively outweigh the gross revenues available to them – making tRetail ROI a distant prospect. Platform operators have created an impossible scenario for tRetail – attacking thin margins with large revenue shares and high fixed costs.”
Pearce claims that from 2000 to 2001, retailers will spend £47 million chasing just £12 million in net revenues. The iTV walled garden platforms provided by digital TV operators are charging high tenancy fees to the retailers, thinning revenues margins. However, this is not the real cause of the problem, which is an excess in tRetail supply, says Forrester.
The report claims that today’s overcrowded walled gardens help no one, wasting the resources of retailers with the least potential while snatching revenues from those with the most. As a result, retailers must take stock of their opportunity and take one of the following paths: Renegotiate, reinforce and reinvest to stay on the platform; move into aggregated retail presence; or retreat altogether from the platform.
“Today’s top TV retailers broadly separate into two groups – general retailers and specialists with populist products,” Pearce added. “For the next two years, these should be the only companies with stand-alone walled-garden presence. While these companies have been relatively successful so far, to capitalise on their existing momentum and ensure success they must increase their commitment to and investment in tRetail. They should ensure collaborative relationships with platforms, guarantee a connection with consumers and staff the TV investment properly.”
A recent Myers report – The Future Of T-Commerce – claims that revenue for interactive TV advertising, commerce and subscriptions is unlikely to surpass $400 million this year, a figure well below other industry forecasters (see Forecasts).
| U.S. Interactive TV Revenue (in $m) | ||||
| Advertising & IPG* | T-Commerce** | Subscription | Total | |
| 1999 | 9 | 0 | 123 | 129 |
| 2000 | 14 | 8 | 280 | 302 |
| 2001 | 20 | 18 | 340 | 378 |
| 2002 | 30 | 28 | 530 | 588 |
| 2003 | 58 | 60 | 950 | 1068 |
| 2004 | 120 | 120 | 2150 | 2390 |
| 2005 | 215 | 250 | 4000 | 4465 |
| 2006 | 400 | 500 | 6800 | 7700 |
| Source: Myers Reports | ||||
*Interactive Programme Guide **T-Commerce: e-commerce over TV and Web transactions instigated by TV commercials
A separate survey conducted by Myers Reports among a cross section of media industry executives revealed a distinct difference in attitude among interactive TV companies and cable operators.
“The interactive companies, which have products, services, expertise and enthusiasm to ensure progress and deployment, express great optimism over the potential of interactive television services. The cable operators, meanwhile, are viewing interactive TV developments with a ‘healthy scepticism,'” says the report.
Myers says that cable operators are well aware of the revenue potential for what it terms t-commerce, but seem to feel that customers will not embrace its services quickly enough to justify their financial investments.
Yankee Group group research forecasts that European t-commerce revenue will reach $17 billion by 2006 (see Forecasts).