QVC turns up the volume

DSN Retailing Today, March 14, 2005 by Mike Duff

WEST CHESTER, PA. -- By marrying broadcast and Internet operations, QVC has become among the most innovative practitioners of electronic retailing with an integrated selling proposition that will continue to become more sophisticated.

Innovation is important particularly as it promotes trial and trust in remote shopping. Because it has earned a degree of faith from customers, QVC has managed to move its business beyond the most likely product lines such as jewelry and into food and cosmetics, which have emerged as among its fastest-growing businesses.

The basis of QVC's business remains its telecasts, which run live 24 hours a day, seven days a week, to 86 million U.S. households. QVC has gone international as well, reaching 13.1 million households in Ireland and the United Kingdom, as well as 34 million German and 11.6 million Japanese households.

In the United States, during the first two months of the year, 7.2 million consumers purchased one or more items from QVC, according to the company.

Worldwide revenues in 2003 were $4.9 billion, a 12% gain from 2002. QVC generated a billion dollars in operating cash flow, parent company Liberty Media stated in its 2003 annual report, up 18% from the previous year. In the United States, sales advanced to $3.85 billion from $3.71 billion, a gain of 3.8%.

QVC employs 100 buyers who keep busy providing 250 new products each week or about 15% of the 1,680 products offered via broadcast. While its product line today is diverse, ranging from apparel to barbecue, jewelry still accounts for 29% of airtime.

Broadcasting is supplemented by QVC's extensive Web site and even a handful of retail outlets. The Web site facilitates offering a tremendous range of products including more than 500,000 books, 100,000 movies and 150,000 music compact discs through its Books, Movies & Music shop. In addition, the Web connection allows QVC to reach the more than 100 million households in the United States that have Internet connections.

Doug Rose, vp of merchandising brand development, said Internet operations have emerged as a critical second pillar supporting QVC's growth. But when it was launched in the mid-1990s, the site wasn't even e-commerce-enabled and simply offered information on the company's broadcasting.

QVC's sales pitch is low-key, with a neighbor-across-the-fence approach. The hard sell might drive consumers away from QVC, said Rose, particularly as shopping and entertainment alternatives are always a click away.

About one-third of QVC's sales are from broadly available national brands, about one-third consist of proprietary products, and another third comprise promotional products. Having proprietary products associated with QVC remains critical, Rose said, but having national brands helps build confidence among consumers, while one-shot items allow the retailer to go to market with deals.

However, Rose said, QVC tends to have the most success with premium brands not readily available elsewhere. The national brands Yankee Candle and Smashbox--brands with limited or no distribution in the mass market--have done well for the company. QVC also has had success introducing brands as they translate from one market to another, as was the case with T-Fal some years back. T-Fal gained from its association with QVC, particularly when it introduced its nonstick cookware to the United States. "QVC is an excellent way to introduce new and innovative products," according to Lauren Giambrone, national accounts manager, media and specialty.

Yet, proprietary brands remain critical as a point of differentiation as well as a way to satisfy particular customer needs and aspirations. The company has built on the expertise of several product partners to produce proprietary lines such as Rocco DiSpirito cookware.

All such measures--as well as a ready acceptance of returned items--are designed to build trust among consumers. Trust is important in getting consumers to buy products they can't touch. Even the hosts and vendor presenters are important in the process, providing studied item descriptions crafted to resonate with consumers.

Technical expertise comes into the mix as well. Each item is photographed extensively before it is introduced on a QVC broadcast or on its Web site to give the consumer many product views. Demonstrations are part of the process as well, and not only on broadcasts. The Web site includes a library of vendor and televised product presentations that provide consumers with a clear sense of the product and its features.

While it takes a low-key selling approach on the Internet, QVC provides layers of information in multiple formats that customers can reference as they shop. By providing data via click-throughs, the basic Web site remains simple and easily navigated. QVC shoppers can click directly to a product or through an array of data, depending upon their preferences.

Internet operations, in addition to making a wide variety of products available at all times, has helped boost specific segments that never really performed in the broadcast selling format, Rose said. For example, QVC never had a great deal of success with men's apparel, but a Jos. A. Banks section of the site has been a hit with customers. Confidence in both the retailer and the vendor plays a role in the success, Rose noted.