Bigger Than Internet Shopping?

As interactive television grows in popularity, more and more companies will begin offering customers the opportunity to make retail purchases directly from their sets. After all, televisions are everywhere, in virtually every home, simply waiting for technology to take them from passive to reactive units.

Consequently, the Internet-based e-commerce industry is watching digital TV's development with a guarded eye, still unsure exactly what kind of threat TV-based e-commerce, or t-commerce, will pose.

"T-commerce may provide serious competition for e-commerce," IDC senior analyst Mary Joy Scafidi told the E-Commerce Times. "But I don't see it replacing e-commerce."

Todd Wiener, managing director of high-tech market research firm TechTrends, told the E-Commerce Times that t-commerce will eventually surpass PC-based e-commerce, but not for at least three to five years.

"After that, e-commerce via TV sets, mobile devices and other non-PC form factors is likely to constitute the majority of B2C (business-to-consumer) e-commerce," Wiener said.

Added Wiener: "But until TV can match every positive aspect of PC-based e-commerce, and perhaps replace the PC entirely, the home computer will be an important consumer gateway for e-commerce."

Scafidi said that a soon-to-be released report from IDC predicts that t-commerce revenues within the U.S. would reach US$5.8 billion by 2005. By comparison, a U.S. Census survey found that e-commerce spending in 2000 had already reached $28 billion.

Walled Garden

One factor holding t-commerce back, according to Scafidi, is that it only allows consumers to shop within a "walled garden" that provides access to only a few merchants and prevents comparison-shopping -- one of the main advantages of PC-based e-commerce.

Wiener said that both the concept and infrastructure behind t-commerce will take some getting used to.

"The technology infrastructure that is required for TV-based e-commerce, from the consumer to the network operator, is several years behind the existing infrastructure for PC-based e-commerce," Wiener said. "The market is still very young, and only a small proportion of U.S. consumers actually have access to t-commerce applications."

Hold the Anchovies

Despite its limitations, both Scafidi and Wiener believe t-commerce will grow, not only because many more consumers own television sets than personal computers, but because t-commerce is ideally suited for some applications like ordering pizza or takeout food after watching a commercial for a certain restaurant.

Other uses for t-commerce, according to Wiener, include banking, selling movie tickets, offering free product samples, and allowing consumers to download product information and coupons.

"Consumers have long been accustomed to the concept of TV-based advertising and shopping," Wiener said, "so these types of applications are perfect candidates for t-commerce."

Scafidi said that over the next few years, t-commerce shoppers will buy small-ticket items, such as books, CDs and games, on impulse as a direct result of seeing television advertisements. She estimated that the average transaction amount for t-commerce will remain low -- approximately $25 -- over the next several years.

Built-in Audience

One group that is clamoring for the opportunity to make purchases through their TV sets is the legion of home shopping channels devotees.

Research by TechTrends found that 82 percent of consumers who purchase from TV shopping networks are interested in t-commerce, twice as many as those who do not make purchases on home shopping networks.

Also, shoppers who are already accustomed to shopping online are more likely to be interested in t-commerce. TechTrends found that 57 percent of consumers who shop online twice per month are interested in t-commerce, compared with only 36 percent of those who do not shop online.

Notably, others interested in t-commerce are senior citizens, whom Scafidi says "are likely to reach a higher comfort level through the TV."

Paying for Purchases

Like e-commerce consumers, t-commerce shoppers are also concerned about security. TechTrends found that almost half of all t-commerce customers cited security as their primary concern while shopping online.

These concerns could force t-commerce vendors to develop alternative payment methods, including having purchases billed to cable or satellite TV accounts, or improve existing credit card and smart card technology.

"It's much more likely that the leading payment method for t-commerce will involve the use of a credit card or smart card," Wiener said. "Either the set-top box will incorporate a card reader, or consumers will enter payment information by remote control."