The Electronic Retailing Association

The State of the Industry by Dr. Julian Oberndörfer

There was a lot of interest in the global panel discussion forum in Seville on the Future of t-commerce following the collapse of ERA (U.S.)

On June 1st 2018 we received an e-mail from ERA (U.S.*) that the board of directors had decided to terminate operations and to close down with immediate effect.

So what happened?

The outside perspective is not easy. The bottom line is most likely that too many individual interests combined with particular management decisions had led to a situation in which income and costs were no longer in good balance, so this last step was inevitable in order to make a new start.

Since that week in June, the DRMA and Response magazine went out of business, the DMA was absorbed by the Advertising Association.

Since Monday 16th July, we know about the PDMI (the Performance Driven Marketing Institute), a newly formed association of known and experienced industry leaders,  led by John Yarrington of the DRMA and Response as well as Bill Sheehan, the last CEO of ERA U.S.  We understand that they have broad support from the U.S. industry players. Their goal is to start a new not-for-profit organization which will inter alia provide networking events for the industry in the U.S.

So we see a market consolidation, one of the many which are part of the digital transition, which is always a great possibility to adapt processes and adjust the focus.

...there seems to be a new institution in the U.S., the PDMI, that can potentially fill the vacuum left by ERA U.S. We will be happy to assess and discuss if and how we can reshape and restructure a global network and partnership.

Is ERA Europe also about to close down?

No. Last year we conducted a study on the European Markets predicting an overall growth of 30% over the next five years and the association itself is in very good shape. Over the past years, we have built up financial reserves representing 50% of our yearly spending. Each budget year we plan our project according to these overall financial goals. Nevertheless we have managed to implement new formats to our successful annual conference such as the EMMAs, we have totally restructured our communication and we have restarted our government affairs activity. This can all be done with a very targeted approach by our small but highly professional team. So every year we deliver more without having increased our fees or pricing.

Is there any threat to the European organisation, ERA Europe?

As an association we have two main purposes. One is to monitor European legislation and regulation, and to step in if required e.g. the revision of the AVMS almost interdicted teleshopping. At the moment we see the biggest challenge in in the regulation platforms selling counterfeits.

However the other main reason companies join is because of the global network and the business opportunities that we deliver. Without a doubt, there has been a caesura and a gap that needs to be, and will be, filled. But as mentioned above, the players in our successful industry are there. The organising body failed. We see it positively that there seems to be a new institution in the U.S., the PDMI, that can potentially fill the vacuum left by ERA U.S. We will be happy to assess and discuss if and how we can reshape and restructure a global network and partnership.

The TOP priority is to maintain the global network and to enable business

What role will / do the Europeans want to play?

We were certain that the strong industry on the other side of the Atlantic Ocean would quickly emerge with a plan (as it seems the PDMI is doing). Until this plan or details are communicated, (not to forget that there are many critical and confidential issues to be sorted out first), we will be more than happy, like everybody, to learn about the details as they emerge and start a discussion on a joint future. Until then as a standing organisation we are the ones that can maintain the connection with the global industry and can share and organise all the communication to give some guidance. The TOP priority is to maintain the global network and to enable business.

What is the main challenge for the industry?

Within the industry we see several developments. Changing media usage patterns i.e. new forms of media consumption - especially related demographic changes particularly with regard to millennials. Due to the European demographics, the issue is not as urgent here as in the U.S. The extensive VOD usage with marketing free media exposure of to up to 3 hrs per day, is another massive issue. However people love to shop. The money is there, the product is there and the explanation of certain products via video cannot be beaten. The bottom line is that our market is still there but it is different and more complicated than in the good old analogue linear days.

Additionally we see a strong tendency of consolidation. Entrepreneurs have had their share of the market and now it is getting complicated. In Europe we remain stable regarding attendees to our conference – other than we have seen in the past in the U.S. However we do see a development of fewer companies coming. If we want to avoid fading out, fresh and young blood is urgently required to grow our conference.

Could a strong reduction of the prices be a solution for the future? Why not create an organisation that just sets up a venue?

An association is more than a social media platform – organising an event requires more than defining a hotel. This, let us a call it simplistic, social media approach that companies in the business meet companies which they already know and which are already in the business, will probably work at the first venue - I predict a retention of 90 % of the usual suspects. The next year maybe 70% come and the third year would probably be the last event.

Especially in our case, it starts with finding the perfect location. then there is the branding and marketing around the event and selling services like meeting rooms, exhibition or other custom-made requirements. Just securing the location usually required an upfront payment above 100k€. We have invested a lot of time and devotion in developing formats such as the EMMAs and the MCMS. With the MCMS we have started a partnership with Medientage München, the biggest European event of its kind.

We do not believe in a price reduction as we have seen done for the Las Vegas show. What happened there? The show floor ticket was reduced to an aggressive 100$. But if you do not manage to improve your product to reach more than the usual suspects you end up serving 2000 instead of 4000 attendees and reduce your turnover dramatically. A price reduction can only be justified if you reach scaling effects, i.e. you become attractive and actually reach new customers in a massive way. If not, it is simply a waste of money.

Other than that, we believe that we must shape our offer and make it more attractive and appealing to newbys. We create new formats as EMMA, MCMS or the Speed Business Dating Event for first timers. We start partnerships and invest into (guerilla) marketing. By the way, we do have a very cost aggressive ticket for first timers.

On the other hand, I repeat my ceterum censeo, we are not-for-profit. Our lives would be far easier if we just stick with the same format every year. Short term this would mean much less work for us. No one asked for an EMMA, MCMS or the newly introduced Speed Dating for first time visitors of the conference. But we do trial and error because we believe in our ideas, but it takes some time to develop them and spread the news. Never forget where we have restarted five years ago.

But having said this, if we reach the famous economies of scale, here is my promise: we will forward these to our members. That means more attendees and reduced pricing. But until then, call me Mrs. Merkel, we will remain strict on financials and improve year on year.

If these events were abolished, couldn't the pricing be massively reduced?

This is one of the famous modern myths. We have done the maths already in our board. The European board is challenging the budget lines on regular bases. To give you an example, Self-Regulation is mandatory, however we have streamlined the process and reduced spending by approximately 70%. The same applies to marketing. Even though we have never had so much digital and video marketing, we have drastically reduced the cost here too.

So for the mentioned programming, abandoning the MCMS and EMMAs would lead to a price reduction per head (attendees) of 50 - 100€. If you consider the overall spending of the companies, they will not even have noticed that we had given a reduction. So we should focus on the magic (and almost impossible) formula, great location, accessible, not too expensive but five star hotel. Because that is where the actual spending is.

However we can assure you of two things. For newcomers and companies, it is very important to read about prestigious events such as the MCMS and EMMAs. As mentioned, the first timer ticket is incomparably price attractive. We get massive media coverage and are improving our reputation (we are still an unknown hidden champion in Europe and globally). The other thing is that the European board of directors is a very strict master with all cost positions and we reassess each budget line regularly.

But to specifically answer the question: no there would not be a relevant cost reduction, but the collateral damage regarding our strategy to build up a position, to be a reputable partner and the known address for the multi-channel home shopping industry would be massive. Additionally we should mention, that we have built up our activities step by step, following a sustainable strategic plan to implement all the small mosaic pieces needed to be THE address and to attract new companies. Considering our financial and overall position, there is no need to abolish this. We are in a good position and we will help realise savings through smart selection of affordable venues.

Why should a product supplier fund public affairs? What is the upside in €?

This is a question which is often asked regarding these activities. And especially in our industry where everything is measurable and profitability is measured by minutes. The immediate upside can not be given.

However, 10 years ago the EU would have mistakenly interdicted all teleshopping and DRTV activities if ERA had not stepped in. Right now we see a total revision of consumer rights – an issue which will directly impact all trading platforms. Also we see a huge issue on the rise, to have intermediary platforms being held responsible for counterfeits sold on their platforms. So it is relevant to us.

Apart from that, in an association you will always find heterogeneous interests. Our membership does not only consist of product suppliers. So we cater to serve, to the best possible extent, the interests of all our different members (and if our sales platforms are happy, so are our suppliers). Another aspect is that, especially as public affairs is not measurable in €, it is the main reason for our non-profit status. If we dropped public affairs we would have to pay taxes on any surplus. This would probably equate to the amount to the money we would save if we dropped these public affairs activities.

Famous last words?

The last weeks have been very intensive. It was overwhelming to receive so much credit regarding our small association. We will continue to do our best not to disappoint the expectations. It seems that we do have a small but highly professional and dedicated team. Thank you team, great job! And now, let us move on and shape the future. It is going to be challenging and exciting. We look forward to being a part of it.

*The correct name is ERA – just for clarity U.S. has been put into brackets to show the important distinction to the independent ERA Europe Asbl.