E-Commerce vs. T-Commerce: Who Will Buy?

Even as annual e-commerce sales storm past the US$45 billion mark, according to U.S. Census Department figures, companies engaged in an older form of selling are soldiering on, using TVs and telephones to communicate with potential customers in homes across the United States.

One of the largest such companies, QVC, was founded in 1986 and earned revenue of approximately $4.4 billion last year. Its televised product pitches are beamed into about 96 percent of all U.S. cable subscribers’ homes and reach more than 18.5 million satellite-enabled homes as well, according to the company. Another firm, the Home Shopping Network, which first started selling via television in 1977, says it books sales of about $2 billion from its more than 5 million customers.

Has the recent e-commerce surge harmed television-based selling, also known as t-commerce? And will future e-commerce growth eat into t-commerce revenue, or is there room enough for both channels in the overall retail realm?

Sales Boom

Fortunately, t-commerce and e-commerce do not cannibalize each other, according to Shirley Brown, principal consultant at London-based market research firm Ovum. “We look at e-commerce and t-commerce as being fairly complementary,” she told the E-Commerce Times. “They’re not in competition with each other.”

Ken Young, communications director at 1-800-Flowers.com, agreed that consumers use the Internet and television for purchasing different types of products in different situations. “Sometimes people want the hand-holding. They may not be comfortable online,” he told the E-Commerce Times. “That’s where the phone’s good.

“As big as the Internet has become, it’s not as ubiquitous as the phone,” he added. “If you’re in the back of a taxi and you need to order something, you’re grabbing your phone.”

1-800-Flowers.com, which launched its Internet presence in 1992, finds its sales are split evenly between the telephone and online, Young said. “The phone business is still growing, but the online business is growing faster. This year we’ll probably see the Internet consistently exceeding the phone part of our business.”

E-Commerce Dominance

Indeed, although t-commerce is expected to reap $45 billion annually by 2005, according to Ovum, e-commerce dominates the brickless sales landscape. By 2008, Forrester Research has predicted, online retail sales will total nearly $230 billion and will account for 10 percent of total U.S. retail sales, up from just 1.3 percent today. Also, about 63 million U.S. households will shop online by 2008, Forrester estimates.

However, many t-commerce consumers prefer the perceived security of using the TV and telephone to order. “I prefer to shop QVC simply because I hate to shop,” said Jackie Yenchick, whose mother-in-law introduced her to the TV retailer several years ago. “I have never had a problem with any of my orders, and most stuff is guaranteed, money back. I have never been an online shopper because I still don’t trust the Internet. I guess that’s crazy in this day and age, but….”

Surf’s Up

Despite consumer reservations, the Internet continues to expand its reach, entering more homes, offices and libraries and further exposing shoppers to its lure. In addition, many people now are more technologically astute, have faster online connections and are less concerned about security risks, thanks to their own experience as well as guarantees of protection offered by some credit card companies and online vendors, Ovum’s Brown said.

Moreover, e-commerce retailers continue to push their medium, which frequently requires lower employee head counts and, therefore, lower overhead costs, she added.

As a result, there is more diversity in the spectrum of products consumers are purchasing online. In its early days, the Internet was mainly a haven for book and music buyers. Today, in contrast, books account for just 3 percent of all U.S. online sales, compared with 14 percent in 2000, according to Forrester.

Supermarkets also are betting heavily on the Internet, and online food and beverage sales are expected to reach $17.4 billion by 2008, Forrester predicts. Likewise, used sporting goods, home products, flowers, cards and gifts, and health and beauty products are expected to benefit from online sales.

What’s On?

Even as e-commerce flourishes, t-commerce also may boom as interactive TV becomes more widespread. Some nations already are reaping solid results from interactive TV, Ovum’s Brown noted. “We certainly see growth worldwide, in some places quicker than others,” she said.

With interactive TV, viewers need only push a button to purchase an item, rather than telephoning a retailer’s sales representative. “It’s an evolving situation,” Brown said. “People have tried buying over the Internet and will go to the TV if it’s more appropriate for what they want at the time.”

Whatever the avenue for commerce — be it in person, online, over the phone or via TV remote — retailers are banking on technology to improve the buying process and entice customers. “[The Internet] is just another way of communicating,” said 1-800-Flowers.com’s Young.

In fact, even t-commerce providers QVC and Home Shopping Network maintain online presences. When HSN developed HSN.com in 1999, the Web site was profitable within three months, according to the company. Amid all this convergence, and with profitability still paramount, many companies are likely to continue embracing all ways of contacting customers, both low- and high-tech. With any luck, there will be room for every channel to flourish.