Elbowing Into Cable Tv's Home Shopping Slugfestby
Walter A. Forbes is nothing if not patient. Twenty years ago, he and a group of other venture capitalists formed Comp-U-Card International with the idea of marketing merchandise to consumers at home via computers. When the PC craze didn't catch on fast enough, Comp-U-Card nearly went under.
Forbes, taking charge as chairman and CEO in 1976, rescued the company by switching to telephone sales. Customers pay an annual fee for access to Comp-U-Card's data base of deals on travel, auto services, insurance, and more than 250,000 products. Based in Stamford, Conn., and renamed CUC International Inc. in 1987, the outfit has climbed gradually into the black and last year reported $59 million in earnings on $742 million in sales from telemarketing.
Now, Forbes wants to return to CUC's raison d'tre: high-tech home shopping. But instead of counting on computers, he's placing his bets on interactive-TV systems. CUC wants nothing less than access to the 60 million U.S. cable-TV subscribers. "Our goal over the next three years is to be in everyone's living room, kitchen, and family room," boasts Richard Leegant, CUC's senior vice-president.
FIERCE STRUGGLE. This time the technology is ready to turn Forbes's vision into reality. Computer and software makers are racing to build converter boxes that let an ordinary TV set display menu-driven screens and cursors. Telephone and cable operators are eager to deliver the interactive signals. And CUC wants to be among the first services they carry into the nation's cable-equipped homes.
With interactive-TV technology, shoppers will use an ordinary remote control to choose products from the screen, which displays pictures, descriptions, and prices. CUC has signed six contracts in the past 12 months (table) and by October will be available in the nine biggest U.S. markets. For cable companies, every new CUC membership means another monthly fee from a viewer who wants the shopping service. For CUC, cable addicts could bring in a bonanza. Jupiter Communications Co., a New York-based firm that researches electronic media, predicts that interactive-TV sales will approach $10 billion by 2001, with 17.6% of U.S. households shopping by TV.
But CUC's strategy has risks for a company with 28 million members and a profitable niche in telemarketing. The competition in home shopping is intense. QVC Network Inc. and Home Shopping Network together do a $2 billion-plus business, dazzling homemakers with cubic zirconia and other trinkets. More such programs are on the way as cable channels proliferate. And many home-shopping services will want to get into interactive sales, too, using the new technology to show products from different angles or let viewers choose between, say, electronics and clothing.
'FEAR FACTOR.' Retailers who market their wares through on-line computer services are another challenge. Domino's Pizza, Hammacher Schlemmer, and J.C. Penney are just three companies whose products you can order via your home PC. And techies apparently spend money: The 100,000 consumers who get CUC through on-line services buy twice as much as the company's phone customers.
But Forbes insists that many people remain scared of computers. "If there's a keyboard, it's too hard, and people aren't going to bother," he says. With a remote control, "you've reduced the fear factor." Another selling point: Pictures of goods on TV screens are far superior to the grainy computer images on PC-interactive systems.
As for the rival home-shopping programs, Forbes believes they're a completely different product. A big part of their attraction is their slick salesmanship, complete with countdowns and cute models. "People are buying from QVC or Home Shopping for the entertainment," says Jupiter Communications President Joshua M. Harris. CUC customers, by contrast, are value shoppers. And in these price-conscious times, the discounts alone should keep bringing in new members. For example, a Toshiba 32-inch color TV with stereo and picture-in-picture carries a manufacturer's list price of $1,799 and can be found in discount chains for about $1,000. Through CUC, it's $869.
Such savings may more than offset the "entertainment" of home-shopping cable channels. And Forbes is as patient as ever. "We get an award for persistence," he says. What he would really like, of course, is an award for blazing the trail in interactive-television marketing.