TV squares up to the Net

It is no surprise to see traditional mail order companies designing Internet retail services.

Even the most traditional home shopping business, intent on retaining the catalogue as its mainstay, cannot ignore the hubbub. Mail order groups taking even tentative steps on-line are providing plenty of opportunities for design consultancies, particularly in Web design and branding. The largest of them can be seen at the forefront of e-commerce innovation.

The Internet is helping to consolidate mail order groups. This week the Grattan mail order business (owned by German mail order giant Otto Versand) becomes the latest entrant into home shopping on the Internet, with an e-commerce website developed with Clarity Communications. Last June its German parent also bought UK catalogue Freeman’s from Sear’s. It seems European barriers are falling.

The business structure of European mail order groups like La Redoute or the Boden Catalogue are ripe for an on-line onslaught. Being run on direct marketing foundations and eschewing the brochure, the telephone hotline and fulfilment infrastructure, they are well-geared to deliver the goods. The postal approach also pertains to the personalised mailshot and direct customer support. Clarity managing director Martin Chilcott believes this type of structure gives mail order companies a big head start over other on-line start-ups.

“It’s obviously a natural extension of their business for mail order companies to go on-line. They are masters of the customer value proposition,” he says. The real issue is whether to just put the catalogue on-line, replicating the print-based operation, or to use the design of the medium to better enable business, he adds.

Retail research group Verdict Research cautiously predicts home shopping will rise from 5 per cent to 9 per cent of total UK sales by 2004. The boom in direct sales comes at a cost to high street and neighbourhood shopping habits, albeit marginally. A Verdict spokesman defines home shopping as mail order, Internet and TV sales: “The emphasis now is on direct-to-the-consumer media. Agency catalogues, which are run through a third-party that takes commission, are in rapid decline”.

In a recent report, Internet research group Fletcher Research found an inevitable trade-off between mail order sales and Internet sales, suggesting a degree of rivalry between the two.

The report claims “some part of the growth of Internet sales will come at the expense of the existing home shopping markets, principally mail order. The UK’s overall home shopping market is currently estimated to be worth about £10bn a year. Electronic shopping, including television shopping channels, has yet to make much impact on the mail-order market. Electronic shopping in the UK was worth about £125m in 1997.”

Mail order behemoths, like Great Universal Stores, and retail giants like Arcadia, are now fully committed to the Internet as an additional sales channel. Arcadia’s Zoom website, designed by The Fourth Room and promoted through the retailer’s Top Shop, Principles and Evans operations, was launched for women in June. GUS, owner of the Argos, Kays and Innovations catalogue operations, formally launched home shopping of the latest variety last week – via interactive TV service Open. Argos has already made waves with its own e-commerce website, mispricing a TV at £3. It too is now running on the Open service, while the Innovations catalogue is pledging to handle all its Internet orders within one hour. GUS recently said that it aims to achieve 10 per cent of total UK sales through the Web by 2003.

E-commerce is providing a foot in the home shopping door for bricks and mortar retailers like Ted Baker and Marks and Spencer (with Pres.co), which are currently developing on-line operations. These high street names pose a greater threat than ever to conventional mail order companies, while others like Next have embraced directory ethics from the start, but shied away from the Internet. Oasis is ditching the print-based medium altogether.

On-line demographics are still hindering the mail order operations from moving on-line. Typically, Internet users are still young-to-middle-aged males, according to Fletcher Research. The current success of computer hardware and software, electronics, music and books reflects this too, so much so that high street electrical retailers like Tandy, Dixons and Tempo are battling the likes of catalogue specialists like Argos on-line. Currys, another client of Clarity, is soon to go the same way, and e-Comet is in advanced development with The Hub Communications.

Other than hugely successful direct computer retailers like Dell, only clothing, food and drink can really claim to have made an impact on the mail order sector, and only in a small way. Fletcher’s latest research finds clothing is the largest (accounting for 1.2 per cent of the industry total) at £400m, while food and drink and consumer electronics will each account for less than 1 per cent of the market total.

But it is to the future that businesses are looking, and the demographics of on-line retailing will change. Mail order shoppers generally fit a low- to middle-income profile. Just notice how the Internet is already becoming the domain of the special offer and last minute deal. But it is perhaps TV, particularly subscription TV, that really overlaps the mail order customer profile. Little wonder then that free home shopping services launched this month by Sky and Cable and Wireless will seek out the eyeballs of the family unit. Something that, for now, the Internet cannot begin to rival.