Cash Registers Ringing as Buyers Migrate Online

Aug 14, 2006  •  Post A Comment

America really does love to shop.

Sales are rising at top TV shopping networks HSN and QVC at the same time that online shopping is jumping too. Consider this: Online shopping grew in total purchases by 13 percent year to year in June to 57.5 million purchases industrywide, up from 50.9 million purchases in June 2005, according to Nielsen//NetRatings.

While shopping networks are doing their part to move into the brave new multiplatform world, they are also finding that viewers still pick up the phone to buy jewelry, housewares and watches.

QVC, which launched in 1986, is now found in more than 90 million homes, putting it on par with networks such as ESPN and Discovery Channel. Worldwide sales in 2005 hit more than $6.5 billion, up from $5.6 billion in 2004.

What’s more, the 2005 figure represents a doubling of the business from 1999, said Angie Simmons, senior VP of broadcasting and TV sales for QVC.

Online, QVC.com logged about $1 billion in sales in 2005, up from $739 million in 2004, according to Internet Retailer magazine.

HSN generated total worldwide sales-through TV, online and catalog-of $3.05 billion in 2005, up from $2.4 billion in 2004.

Even newcomer Ultimate Shopping Network, which specializes in higher-end items such as Prada sunglasses and Fendi bags, is feeling the love. The network launched in 2003. The company expects to hit $50 million in sales for fiscal year 2007, which ends in April next year, up from about $27 million in fiscal year 2006, said Mark Miller, chairman and CEO. USN is distributed in about 30 million homes.

TV Shopping on Rise

Not all shopping networks have been successful. E.W. Scripps shut down its shopping network Shop At Home this spring, citing ongoing financial losses. So all is not rosy, but by and large, shopping on TV is growing.

The survivors feel good about how they’re positioned in the midst of the current upheaval and uncertainty as traditional TV advertising finds itself under siege. That’s because shopping networks don’t rely on advertising; they make money on sales.

“We are in a fantastic position,” said John McDevitt, VP of finance and business development for HSN, found in 89 million homes. “You see all of these companies sweating out issues with digital rights management, advertising on the Web. And we own all our own content and push it out over any medium. … People flipping between channels [and finding HSN] helped us. What’s creating pressure for ad-supported networks is creating opportunity for us.”

Shopping networks are also on the forefront of digital distribution. Both QVC and HSN stream their on-air feeds live on their Web sites and have for a few years, putting them well ahead of the curve. Most broadcast and cable networks have still only dabbled in premiering shows online. Also, both QVC and HSN boast robust online shopping sites.

Like other networks, HSN said it must serve customers where they are. That’s why HSN carries the live stream on its Web site and plans to introduce VOD programming tied in to the “Week in Review” page on the Web site that includes details on all the products presented on-air over the past week.

The site already features an interactive chat so site visitors can interact with each other while watching the channel online. HSN is also evaluating VOD opportunities and how to migrate its content into mobile devices-through mobile alerts, for instance. “Whenever and wherever you want to consume HSN content, we’re there with a simple means of delivery,” Mr. McDevitt said.

QVC said traffic began to jump on its Web site in 2005 as broadband took off, and the site now includes video clips of more than 1,000 products.

But the increased focus on the Web site raises the question of cannibalization of the on-air mothership. A Web site must work in tandem with the on-air network and serve as the “anytime assortment,” said Bob Myers, senior VP for QVC.com. For instance, on any given day, the network features about 280 items on-air, but 200,000 online, he said.

HSN’s Mr. McDevitt said a multiplatform approach is simply a business reality. “What we try to do is bring somebody in through any of our means and keep them in our different areas,” he said.

Interactivity is one such means. Shopping networks have been on the forefront of interactivity since they were first spawned. After all, the very programming concept-phoning in to buy-is interactive at its core. Now, shopping networks are taking that further and testing one-screen capability that lets viewers interact and buy products simply by using the remote. HSN is testing this capability with Cablevision and Time Warner Cable. But one-screen interactivity still faces an uphill battle because cable operators have been remarkably sluggish in deploying the technology.

USN is also experimenting in the one-screen arena. In May the network inked a deal with Internet protocol TV provider Interactive Television Networks to deliver USN’s channel with one-screen capability. ITVN counts about 10,000 subscribers. Under the ITVN deal, the network will let consumers purchase products instantly using only their remote control and also navigate in a nonlinear fashion, rewinding the network and checking out related items.

Mr. Miller said he plans to grow the network in other ways too, including expanding the product categories to include housewares and more women’s accessories, bedding and fine china. “Our assortment is not wide enough. It needs to be much wider,” he said.