Shopping from the sofa: A television retail channel is sweeping the United States. Michael Marray reports
Tuesday 20 July 1993
Zap the set to the QVC channel and pick from the panoply of goods on display - pots, pans, jewellery or whatever. They are all just a toll-free number away, 24 hours a day, seven days a week. The most strenuous part of this particular form of consumption is reading a long string of numbers from a credit card.
The QVC channel - Quality, Value and Convenience is the All-American promise behind the initials - is on something of a roll. Last week it proposed a merger through a share swap with its main rival across the television dial, Home Shopping Network. If the deal goes through, the new company will be run by the current QVC board, giving it an iron grip on the home shopping industry in the United States.
Meanwhile plans for international expansion are well under way. Home shopping will reach the UK in the autumn, due to a joint venture signed in June between QVC and Rupert Murdoch's BSkyB satellite network.
QVC has also recently signed a deal with the Mexican television giant Grupo Televisa, which from November will produce Spanish-language shows live from Mexico, to be shown in Spain and the Spanish-speaking countries of Latin America. Portuguese-language programming for Brazil and Portugal is also planned.
The driving force behind this advance on all fronts is Barry Diller, the abrasive executive who early last year resigned from one of the top jobs in Hollywood as chairman of Murdoch's Twentieth Century Fox Film Corporation. Diller was known to be looking for something new and challenging, but his old colleagues in Hollywood reacted with hoots of laughter when they heard last December that he was to become chairman of a home shopping network.
Facing derision is something that home shopping executives have become used to; making lots of money probably helps to cushion the blows. It is just eight years since Home Shopping Network Inc went national, closely followed by QVC. In that time annual turnover for the industry has grown to about dollars 2bn.
For the first quarter of 1993 QVC reported net income of dollars 21.6m on revenues of dollars 273m - almost 18 per cent up from the first quarter. And Mr Diller, who committed dollars 25m of his own money to QVC when he came on board, clearly thinks that the real growth is yet to come.
The kind of goods sold on the home shopping channels range from laptop computers to clothing, and kitchen utensils to jewellery. Home Shopping Network is the more hard-sell of the pair. The necklace first priced at dollars 60 is suddenly slashed to dollars 35, and then dollars 29.95. As the seconds tick away on a clock in the top corner of the screen the presenter gives a breathless sales pitch, while a model wearing the necklace sits smiling blankly into the camera. For the viewer, the heat is on. After two or three minutes the necklace has gone and the next irresistible item for sale has taken its place.
There is, it has to be admitted, something of an image problem with home shopping. It is not the stuff of Upper West Side dinner party chatter, few of whose coterie would have been watching last Wednesday when Home Shopping Club was selling Cupid and Hearts Cluster Pin Sets for dollars 22, and Romantic Faux Pearl Heart Clip Earrings (available in pink and gold) at dollars 38.25 a pair.
What defines home shopping is business wrapped up as entertainment. Soap opera stars appear as special guests on the shows, and viewers are encouraged to phone in to tell the world how happy they are with their purchases. On Wednesday evening Viola from Jupiter, Florida, called to tell viewers about the crystal clock she had bought for dollars 19.95. 'I've got so many lovely things from you - I admire all of you so much - and I think you're doing a wonderful, wonderful job,' she told the presenter.
But it is not all bargain basement shopping for people who wear too much jewellery. For example QVC has a Hi Tech Toys and Electronics show where it has offered goods such as a Panasonic VHS-C Camcorder, priced at dollars 899.
QVC is trying to increase awareness of its programme schedule so that people know what it sells, and when, and can tune in for specific purchases. This will make the company less reliant upon impulse purchases. On a recent program QVC sold 3,000 camcorders in one hour, which probably points to planned rather than impulse buying.
The logistics of handling all the telephone calls, orders and packaging are formidable. HSN, which is headquartered in Florida, employs 5,000 people and has the world's largest telemarketing centre. Last year it shipped 25 million packages. Part of the rationale for the merger between QVC and HSN would be to pool sophisticated computer systems and distribution facilities, which analysts believe could save dollars 50m a year in operating costs.
QVC is continually on the lookout for new partnerships with vendors, and earlier this year formed a venture with Saks Fifth Avenue, the posh New York department store. The clothes collection was a sell-out, with gross orders topping dollars 570,000. And Ivana Trump did a line of clothes for HSN, which also quickly sold out.
Sourcing new products is one of the keys to success, and has also been a recent source of scandal at HSN. In February of this year Liberty Media, which controls QVC together with Barry Diller and Comcast Inc, acquired a controlling interest in HSN, and was making an offer for the remaining shares when allegations surfaced that HSN executives held secret stakes in companies supplying goods to be sold on HSN, and were getting a cut of the profits.
Liberty quickly withdrew its offer, but last week QVC came back with the new offer of a merger via a stock swap valued at dollars 1.4bn. Under the deal HSN would keep its listing on the New York Stock Exchange, but would change the name of the listed company to QVC Inc. With the QVC board taking over lock, stock and barrel, it is a classic reverse takeover.
With the hard-driving Diller in command QVC looks well placed to rapidly increase turnover and profits within the US, giving it a strong base from which to pursue its global expansion plans.
The future looks bright, and the laughter aimed at Diller may soon be dying down in Hollywood, where making vast amounts of money always makes people sit up and pay attention - even if it comes from a business as tacky as home shopping.
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