tRetail in the UK is in trouble — ROI is a distant possibility, while dozens of retailers chase tiny revenues, according to a new report from Forrester Research (Nasdaq: FORR). Rather than struggle on, retailers must reassess their opportunities now — the majority should at least abandon their stand-alone walled-garden presence in favor of shared-cost infrastructure, Forrester argues.

“British retailers’ dissatisfaction with current tRetail revenues is wholly justified,” said Forrester Research Director Fraser Pearce. “Retailers’ combined costs massively outweigh the gross revenues available to them — making tRetail ROI a distant prospect. Platform operators have created an impossible scenario for tRetail — attacking thin margins with large revenue shares and high fixed costs, resulting in the fact that by the end of 2001, retailers will have spent £47 million chasing just £12 million in net revenues. While retailers have pressured platform providers into reducing tenancy fees and commissions, cutting these costs doesn’t attack the real cause of the problem — an excess of tRetail supply.”

Forrester asserts that today’s overcrowded walled gardens help no one. They waste the resources of retailers with the least potential while snatching revenues from those with the most. As a result, retailers must take stock of their opportunity and take one of the following paths: renegotiate, reinforce and reinvest to stay on the platform; move into aggregated retail presences; or retreat altogether from the platform.

The aggregation of tRetailers isn’t a new concept. To provide an option for marginal retailers to stay in tRetail, platform providers should set up an aggregation system of payments for performance, not privilege. Although aggregation will be a relatively risk-free proposition, retailers worried about brand erosion — with very limited budgets or ambitious Web plans — may choose to step off the platform for a few years as first-mover advantage is limited and the Web offers a better opportunity.

“Today’s top TV retailers broadly separate into two groups — general retailers such as WHSmith and Woolworth’s, and specialists with populist products like Carphone Warehouse and Electronics Boutique,” Pearce added. “For the next two years, these should be the only companies with stand-alone walled-garden presences. While these companies have been relatively successful so far, to capitalize on their existing momentum and ensure success, they must increase their commitment to and investment in tRetail. They should ensure collaborative relationships with platforms, guarantee a connection with consumers and staff the TV investment properly.”

For the report “Resuscitating Interactive TV Retail,” Forrester spoke with 35 leading retailers selling on interactive TV.