Capturing customers with TV retailing

Nation's Business, Feb, 1997 by Dale D. Buss

The major networks linking retailers with television viewers are looking for small firms' products. Here's how to decide if selling by TV would work for you.

Mike Wood was a Berkeley, Calif., lawyer who wanted to help his 3-year-old son learn to read but couldn't find any toys for the task. Then he invented a phonics-teaching device, developed a prototype, and persuaded the Home Shopping Network to ply it on the air.

Now, after selling tens of thousands of the laptop-computer-sized devices on the TV retailing network at $35 apiece over the past two years, Wood has become a nonpracticing lawyer and budding entrepreneur. His company, Leapfrog LLC, posted about $12 million in revenues in 1996 from his line of various phonics-teaching products.

The Home Shopping Network "has been a great source of sales for us, but that's only one of the things this has done for our business," Wood says. "It's also been a great way for us to tell our story to a big audience that then generates further sales. And for every sale we make on the Home Shopping Network, we make some significant additional sales through normal retail channels."

Dream-come-true stories like Wood's are increasingly common for small companies as the Home Shopping Network (HSN) and the other major national companies that retail by TV widen their search for items to feed the new-product streams that are vital to their programming success.

It's no longer a medium open only to big companies or celebrity pitchsters like Ivana Trump and Priscilla Presley "It's a powerful medium," says Jim Tobin, an official at the Michigan Jobs Commission, a state agency that helped another TV-retailing network, QVC, originate a week of programming from the state last fall. "We have people who had no distribution system at all who went on QVC and within minutes sold thousands of units," he says.

Each of the so-called Big Four TV retailing companies--HSN, based in St. Petersburg, Fla.; QVC, in West Chester, Pa.; Shop At Home, in Knoxville, Tenn.; and ValueVision, in Eden Prairie, Minn.--says that cultivating small-company suppliers has become a top priority.

And for good reason. TV retailers have a combined 158 million potential viewers every day (with considerable overlap) and countless hours of programming to fill. Competition has grown more intense as the number of households tuning in to home shopping has leveled off. So the shopping networks cannot afford to leave any stone unturned in their efforts to come up with interesting new products.

That's especially true because mass discounters have encroached on the networks' turf, stocking goods that previously were available only on the tube.

So the shopping networks have become more aggressive in trying to differentiate the wares they offer from what consumers can get elsewhere. And that is leading them to small, independent suppliers.

"We're constantly looking for new products to feed this machine, because we've got to reinvent it every day," says John Pinocci, vice president of product and event marketing for HSN. With about 69 million potential viewers, HSN is the industry's largest network. "That leaves us open to-and motivated to-having smaller vendors and manufacturers present goods to us," says Pinocci.

Adds Bill Lane, vice president of new-business markets for QVC: "New products and new categories are the lifeblood of any retail organization. What we've discovered is that lots of companies that have those things just aren't able to finance themselves or establish distribution. So we form a symbiotic relationship with them."

In fact, for the past two years QVC--which counts about 59 million potential viewers on cable systems around the country but has substantially higher revenues than HSN--has been the most aggressive retailing network at soliciting products from small companies.

In 1995, in an initiative called Quest for America's Best, QVC sponsored statewide trade shows to evaluate the wares of small companies. It then selected 20 small concerns from each of the 50 states to appear with their products in a series of three-hour shows aired from each state.

Last year, QVC pared the number of states to eight, but it spent a full week on location in each of them. In QVC's program for this year, selected products from each state will compete for national TV appearances. Qualifying products must be in production and must retail for no less than $12.95.

The quest by QVC has made all the difference for Mark Scherr, a journeyman heating-systems technician, and his wife, Susan, who own Innovative Sensations Inc., in New Berlin, Wis. Nearly five years ago, the Scherrs developed a 17-inch-long plastic device that allows users to gift-wrap in a balloon any item that can pass through the device's 2 1/2-inch-diameter tube.

Over more than two years, the company spent $50,000 on advertising the Pump-a-Present in craft and floral publications and other magazines, but to little avail. "The product sitting in a magazine just wasn't showing people what our product was all about," Susan Scherr recalls.