The Electronic Retailing Association

Article: Global Challenges to Electronic Retailing, both Millennial and Digital

by Budd Margolis

Budd Margolis: expert for global TV shopping & eCommerce.

Budd Margolis is a London based consulting expert who started his TV shopping career with QVC UK.  He has been working in the field of global TV shopping & eCommerce for some 25 years and has worked in over 50 countries.  He is now an associate with Best Flow Factory Retail of Copenhagen, Sofia, Dubai & London which is a group of digital and broadcast retail specialist who plan, specify, build companies and improve sales for existing companies.

Welcome to digital convergence in the age of the consumer.

As electronic retailers, we know there has been serious change and we can expect much more to follow. Evolving technology and new consumers evolve and innovate. The impact on how we used to do just about everything is severe and disruption hardly describes the change we are experiencing.

Market Erosion and Winds of uncertainty

For the past three years, American live TV shopping and DRTV infomercials sales have generally been down or lacklustre. Throughout Europe growth has continued but winds of uncertainty over Brexit continue. Some of the direct sales market erosion is being caused by digital disruption and new consumer behaviour.

Winners and Losers

Results for 2017 now indicate that, as people watch less traditional TV, DRTV is weakening. QVC has achieved better domestic results this year and even better performance across most of the international channels, with very strong performance of their web-based Zulily site, while now fully acquired HSN has seen further decline. Other USA shop channels and infomercial companies have continued in a weaker market. The question remains whether this industry can see a reversal of fortunes and what measures have to be taken to combat the many problems.

Transform to thrive

DRTV & Live Shopping vary in consumer profiles as most consumers do not cross over and shop with both formats. The formula for these two formats works differently but are still very powerful and important. Video sales have great potential in the digital space but companies in either discipline will have to transform in order to thrive. And we have yet to experience the true potential of online video selling outside of websites.

Web Ads have surpassed TV

Significant milestone: web ads have surpassed TV. In 2016, TV captured roughly $71.3 billion in domestic revenues, just under digital advertising's $72.5 billion. (Source: IAB’s digital ad revenue report). There is no going back.

3 significant challenges to the growth of this industry

1. Changing Consumer Behaviour: Millennial experience over materialism patterns of consumption and priority of discovery over loyalty to traditional brands.

2. Increased Digital Competition: with greater consumer intelligence or “Smart Retail” and SoMo = Social Media growth as another powerful retail distribution channel.

3. The War to Win Delight - we do not sell essential or commodity goods, we sell emotion by telling great stories. Terrestrial TV had to respect national boundaries which was a barrier, but today digital delivery via the internet has democratised most, and soon will cross all, borders. Many channels churn out content but the uniqueness of concept & product, and the ability to connect has been eroded. Few are innovating or discovering “excitement”.

Have you defined a strategy for how to approach these 3 points?

10 Global Trends and Challenges

#1 The digital retailing competition is going to be more global and will be ferociously quicker, flexible and more intelligent.

#2 Social Media Marketing and analytics is going to grow and will be key to surviving the Millennial challenge.

#3 Global expansion is going to be more important and we are behind in providing leadership in such mass markets as China/Asia, India, Africa and the Middle East, Eastern Europe and South America. China, just a few years ago, had to intercede and remove many shop channels for regulatory violations. The same could happen in other markets where there is no organised association such as the ERA which can lobby, provide self-regulation and protect the industry by protecting the consumers.

#4 Liberty Interactive rebranding into Qurate Retail Group is intriguing. Maybe this is the vision that is required for the group to provide a 'third way to shop', beyond transactional e-commerce or traditional brick-and-mortar stores. They will need to move quickly and with the skill to acquire and develop synergistic and futuristic platforms to survive what may be the collapse of traditional broadcasting caused by the digital shift in retailing.

#5 TV shopping growth and revenues in the rest of the Western economies will also begin to experience similar downward pressure as audiences evolve and change their patterns of consumption and viewing behaviour. There remain many markets where strong growth will be available for the next 5 to 10 years. But everyone is catching up and underdeveloped nations often leapfrog tradition and technology.

#6 The claim that mobile and web sales are growing does not impress me because most of this metric is derived not from new customer generation but rather existing customers extending their use of multi-platform exposure. Sales have been down or stagnant and many companies report growth which, when compared to a previous year, may sound better than the trend over the previous 5 years.

#7 New channels will come and weak ones will be bought or fade away. Few new concepts are launched and there is little appetite for risk and innovation. But without some vision, sacrifice and innovation, we will not progress and some of us may not survive.

#8 Fortune magazine prediction for 2018: The number of USA cord-cutters will hit 27 million. The ranks of cord-cutters will keep ballooning in 2018. By the end of 2017, about 22.2 million Americans ditched their cable TV providers, a 33.2% increase from 2016. (Source: eMarketer) Those losses are predicted to rise in 2018 - and the next, and the next. But don’t shed a tear for the cable industry’s bottom line. As traditional TV subscriptions plummet, companies like Comcast and Verizon are seeing big growth in broadband.

#9 Besides Millennials, women across the world are increasingly empowered and earning more. She is a significant influencer for purchase decisions and dominates consumption. The USA has a 50% divorce rate and single mothers combine to represent a significant market. Unlimited access, filtered and searchable access to products and same day delivery present a massive challenge. Competing head-on with Amazon would require time, resources and vast sums.

#10 We have to monitor and beware of trends which travel, not just from America, but back and forth across the world. Digital technology has changed everything as innovation appears everywhere, and is “democratised” or no longer limited to economic dominance.

I remain optimistic that with hard and smart work, many companies will find solutions to today's challenges and improve. Our competition is not from within the industry but in the bits and bytes which can chew up the inactive.

The future is bright if you face in the right direction.