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From TV to VT

Sep 2, 1999 4:34 PM   By Martin Rapaport
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By Martin Rapaport



The sale of jewelry via television (TV) marketing networks has matured into a retail jewelry industry now approaching $2 billion per year. While traditional jewelers initially scoffed at the idea that consumers would buy jewelry over TV the fact is that “majors” such as QVC and HSN have increased their jewelry sales and market share. They have also played an important role educating consumers and stimulating demand for a broad range of precious and semiprecious stones.

Traditional “brick-and-mortar” retail jewelers have distinct advantages over TV and internet networks. Many consumers want a “touch and feel” approach to selecting their jewelry, the assistance of a salesperson and the instant gratification of walking out of a store with their purchase. While these advantages provide an important safe haven for traditional retailers, we cannot ignore the impact that TV and internet shopping networks have had and will have on how consumers shop in the future. We are witnessing a segmentation of the consumer jewelry markets into broad classes of traditional consumers and electronic consumers.

TV networks, the pioneers of electronic retailing, have developed some advantages over traditional retailers and have also worked hard to mitigate the disadvantages of electronic commerce. The ability to broadcast product directly into millions of consumer living rooms 24 hours a day, take instant orders over the phone and deliver directly to the home of the consumer in a timely manner are benefits that are appreciated by electronic consumers. Furthermore, liberal 30-day or longer return policies assure the consumers that they will have time to inspect the jewelry and assure that it meets their expectations. TV marketing has redefined the consumer shopping experience and laid the foundation for the expansion of electronic sales on the internet.

TV Limits

Jewelry sales on TV have been severely limited by a variety of factors. Due to the nature of product presentation, TV sales are often impulse purchases for relatively inexpensive items ($50-$150). Most TV shoppers are middle-aged women on limited budgets that have lots of time to watch television. This is not the profile of the important jewelry buyer or the new-age electronic consumer developing on the internet. The basic problem with TV retailing has been its inability to sell medium-to-high priced jewelry without suffering disastrous return rates.

As one leading TV expert explained, "We have to sell the product twice —once when it is shown on the screen and once again when it is delivered to the consumer." While liberal return privileges successfully address the problem of customer concern about buying a product unseen, they also promote the idea that sales are not final and returning goods is as much a part of the shopping experience as buying goods. The current demographic of impulse driven limited- budget TV shoppers almost assures the return of a relatively expensive item when the consumer is faced with the bill. It is no wonder that diamond and expensive jewelry sales on TV have been very limited and that average sales on the major networks are about $100 per jewelry item.

Just because TV sales have been limited in the past, does not mean that they will be limited in the future. The TV networks have saturated the lower price point jewelry categories and they realize that the only way that they can grow is by moving up to better quality more expensive items. The only way they can do this is by reaching out to a broader and better customer base. In order to grow, TV networks will have to expand the demographics of their customers and find new and better ways to attract a consumer that can buy and will not return a medium to expensive piece of jewelry. In short, it is exactly the same type of consumer that traditional retailers base their business on.

Changing Demographics

The movement towards an improved demographic base by TV networks is evidenced by the recent move to diamond jewelry by a number of shopping networks. To a limited degree TV sellers are finding out that they can successfully move more expensive diamond jewelry successfully. Some are taking a very high road. Consider QVC’s new “Promise Diamond Collection,” every stone of 0.25 or more is graded and laser inscribed by the GIA. How many traditional retailers offer this level of consumer assurance regarding product quality?

Since TV sellers must convince consumers to buy products sight unseen and they must limit expensive returns, they are willing to go the extra mile on quality assurance and standardization. The money they save by not having the overhead of a store and sales staff is going into certificates and quality assurance. Competition between TV and traditional retailers will not necessarily be limited to price or perception of price advantage, it will also take place in the area of consumer quality assurance and satisfaction.

It is reasonable to assume that TV networks will have a difficult time moving to a more affluent customer demographic. While some smaller networks that can focus on high-end consumers will have an easier time, the majors are going to have to try to bring in new demographics without losing the old. Furthermore, for a number of reasons TV is not the ideal medium for selling to affluent consumers. For example, the presentation method is linear so you can’t find the product you need immediately; if you are making money, you don’t have the time or inclination to sit in front of the boob tube; you can’t compare prices and qualities: the experience is passive instead of active. Finally, the most important point. The demographics for the electronic consumer that the TV people would like to get is already out there. These customers are alive and well on the internet.

Here Comes The Internet

For all the above reasons it appears natural for the TV networks that wish to sell better quality jewelry at higher price points to push onto the internet. After all, they already have the distribution, quality control, telephone support and other infrastructure to deal direct with very large numbers of consumers. Some of the jewelry items such as QVC’s “Promise” line are already offered on both TV and the internet. This trend is likely to expand in the near future. One way or another, successful TV marketing networks will establish internet marketing channels.

From the perspective of the “better demographic” consumer the internet offers a number of significant advantages over TV shopping. It is as, or even more available than TV; it allows consumers to locate and buy exactly what they want when they want it; it allows price comparison across the whole market; it provides detailed education and price information; and most importantly it is a proactive rather than a passive merchandising and marketing method. Wealthier consumers on the internet know what they want and go after it; they don’t sit around all day waiting for what they want to appear on some TV screen.

From the perspective of the TV networks, internet marketing is rather confusing. Frankly, most of them simply don’t know how to play this game. They are too set in their old ways. Some probably consider internet networks to be competition to their TV networks. However, the best and brightest firms will eventually evolve their thinking into the new age of VT.

Enter VT

VT, stands for Virtual Technology, or Virtual Television — the marriage between TV and the internet. Clearly the development of this idea is not limited to TV shopping networks selling jewelry. It is the next new wave of interpersonal communication. Of course, VT will not only revolutionize the way we communicate with each other, but also the way we buy and sell products.

One way to think about VT is as the natural extension of internet technology. For example, a consumer could click on an item and obtain an immediate video interface with a salesperson whom they can see and talk with. They can also compare products and get detailed specific product information. How about a video diamond grading report with three dimensional imaging of the stone, and the voice of a gemologist as she points out the grade maker inclusion? How about trying on a piece of jewelry? No problem. By the way, there is nothing to stop a consumer from visiting a local retailer online. They can also visit a virtual jeweler.

Another way to think of VT is as a natural extension of television. An actress you like is wearing a really nice bracelet. Go ahead, click on her. Now you can buy the item and get all of your internet information. The move from TV to internet will be seamless. You will basically be able to get everything everywhere.

New Information Generation

As the new information generation develops, (both in terms of products and people) old style TV shopping networks will be looked upon the same way we consider Model T Fords, an interesting relic of the old days. Ultimately, TV networks will become history, they will be replaced by much better hyper-efficient electronic markets. TV is in fact a presentation tool, a way to show something — to tell a story. VT (i.e. internet with full video communication and much more) will be the ultimate marketing tool — the way to sell something.

TV shopping is but a simple example of relatively low level technology being used to penetrate a retail market. That TV networks have become as successful as they are is testimony to the fact that new marketing methods can and will work even in a very traditional and personal market such as jewelry. Simply put, at some level, consumers are willing to buy jewelry without seeing it. The real challenge for TV networks is to move upscale and capture greater market share. The only way they can successfully do so is by significantly expanding their technological base and integrating into the internet through VT. TV will only take them so far and then they will be forced into VT.

VT will revolutionize the shopping experience and create wholly new vehicles for retailing. It will also give upstart technologically superior firms the ability to penetrate retail markets and gobble up market share. Some high-tech internet firms have already raised millions of dollars and are now trying to take over diamond and jewelry retailing market share. While pure technology companies that do not have the necessary product knowledge and experience will probably fail, they will keep on trying. Jewelers be warned: there are an unlimited number of amazon.com’s out there ready to enter the jewelry industry and eat your lunch.

Where all this leaves the traditional retail jeweler is anybody’s guess. It all depends on what the jewelers does. If they maintain a conservative — we don’t change unless we have too — position, they will be wiped out by high-tech firms that hook up with smart jewelers and take market share. If they incorporate the latest marketing technology as it develops, they will probably be able to defend themselves against high-tech firms that know a lot about technology but little about jewelry products. Ultimately, the future will belong to forward-thinking jewelers who are not afraid to optimize available marketing technology and or high-tech firms that are wiling to work with smart retailers and/or wholesalers.

While many areas of retailing will remain relatively stable in the short term, the future is clear. New information technology will completely revolutionize the nature of retailing in the medium term. Market share will go to firms that have the right combination of technological marketing and product based merchandising skills. VT will not only replace TV, it will replace traditional retailing as well.
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Tags: Amazon, Consumers, GIA, Jewelry
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