QVC integrates CVN strategies; starts anytime ordering, easy pay, QVC card - home shopping programs

Discount Store News, Oct 1, 1990 by Arthur Markowitz

QVC Integrates CVN Strategies

Starts Anytime Ordering, Easy Pay, QVC Card

WEST CHESTER, Pa. -- Teleshopper QVC has implemented three marketing strategies to make its retailing more attractive to cable shoppers while differentiating the service from its main competitor, Home Shopping Network.

The moves followed QVC's March 30th integration of the CVN teleshopping network into its own operation, boosting QVC's cable reach to 35.8 million homes from 16.1 million households at the time QVC was acquired for $463.6 million in October 1989.

QVC's three "sales-building strategies," all of which were programs successfully deployed by CVN, are:

* An order anytime policy, which went into effect last month, by which shoppers can order merchandise at any time as long as stock is available, not just when an item is being sold during a broadcast.

QVC sells merchandise in segmented programs, usually one hour long. It distributed a monthly program guide, so consumers know when specific merchandise will be sold, enabling them to tune into that segment or, under the new policy, tape the show for later viewing and ordering.

The introduction of the order anytime service required a major change in QVC's computer program. Its sales tracking system--just like competitor HSN's--was originally designed to record purchases just when the goods were being sold. * An easy pay plan, started in July, allows customers to pay for selected big-ticket items on an installment basis over a few months. * The introduction of a QVC charge card in May, underwritten by the General Electric Credit Corp., also made shopping easier.

QVC founder and chairman Joseph M. Segel told a New York Society of Security Analysts meeting that "the CVN consolidation temporarily disrupted viewership and looks longer to wrap up than expected." CVN shoppers haven't become QVC customers as quickly as the video retailer had projected, he added, "so we lost ground in April and May and we don't expect to overcome the losses despite a projected profitable fourth quarter."

He said the first-quarter and half-year losses would continue through the third quarter ending this month despite big jumps in sales due to the CVN acquisition. Sales in the six months ended July 31 of $320.1 million were up 198% from $107.4 million last year, while there was a $10.3 million net loss compared with $2 million in net profits in 1989. In the first quarter ended April 30, volume increased 207% to $161.3 million from $52.5 million, while the bottom line showed a $5.8 million net loss compared with $1.2 million in net earnings.

QVC's sales goal this year was $900 million, or double 1989's $454.3 million volume. But Segal backed off that figure, telling security analysts "I don't see reaching it because of the weakening economy."

Besides recapturing the former CVN shoppers as QVC customers, QVC, through its new programs, is shooting to bring their purchases up to its average sale of $42.

Jewelry merchandise accounts for about half of QVC's sales, with the teleshopper's share of Sears products sold on its network amounting to 7% to 8% of volume and QVC's revenues from the JCPenney TV Shopping Network totaling 1% to 2% of sales. QVC gets 25% of the revenues of Sears goods sold on its program while its revenues from JCPenney TV Shopping Network are a combination of a percentage of sales and income from leasing a transponder to that network.

Segal noted that QVC's sales don't include income from shipping and handling charges. He said that HSN includes these charges as part of its sales. Trade sources noted that these revenues account for about 12% of HSN's volume and that the shipping and handling operation is a profit center for that teleshopper.

The three marketing moves, Segal said, are expected to attract former CVN customers, many of whom indicated these features were an important shopping benefit when they decided to purchase goods on CVN.

QVC will also spend about $2.5 million in a major promotional mailing to over six million cable households that had received CVN.

Overall, QVC estimated that about 31 million cable TV subscribers who can receive the teleseller haven't bought any goods from the network. The retailer's total customer base last year--consumers who had placed at least one order with either QVC or CVN--was 4.5 million households.

To strengthen its reach to the broader cable TV market, which include homes that use backyard satellite dishes to view programs, QVC is expanding its marketing relationships with sport figures, movie stars and other celebrities. Johnny Bench, Brooke Shields, Victor Kiam, Helen Hayes, Bobby Rydell, Bob Keeshan (Captain Kangaroo) and Angie Dickinson are among the celebrities that have appeared on QVC shows.