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As Hurricane Irma prepared to rip through the Florida Keys in September, the Home Shopping Network dispatched 100 employees from St. Petersburg to Nashville so broadcasting could continue uninterrupted.
Under the blistering lights of a Music City studio, E! presenter Giuliana Rancic tugged at a charmeuse G by Giuliana blouse to demonstrate its stretch. A representative from Lancôme cooed about the “suction-cup effect” of its Régenerie Lift suite of anti-aging elixirs. In front of a pair of French doors that led to nowhere, a presenter brushed her hands over the nap of a Vince Camuto suede bootie. “Isn’t it gorgeous?” she purred.
Clocks continued to count down. Operators stood by and received calls. Online shopping carts filled up. The show went on, and HSN emerged from the storm unscathed and intact. It was a logistical miracle.
Now the company is battening down the hatches for Hurricane Amazon.
The world of home shopping can feel like a relic from a bygone era, a place where faded celebrities, reality-show stars, and overexuberant pitchwomen hawked everything from leather purses to fitness equipment. Home-shopping channels were something you flicked through on wakeful nights before Netflix and on-demand streaming gave you better options. They were a panacea for the lonely and homebound, who filled the quiet with that distinctive patter.
But television commerce isn’t going the way of the mail-order catalogue, at least not without a fight.
This past summer, HSN announced that it was merging with its longtime rival, QVC, in a $2.1 billion all-stock deal. Liberty Interactive, QVC’s corporate owner, agreed to buy the remaining 62 percent of HSN that it did not already own. As soon as the transaction is finalized, HSN will fall under the auspices of the QVC Group, although it will continue to operate as a separate brand.
Together the companies will be “stronger than they are individually and stronger yet as a standalone entity” in “today’s changing and difficult market,” Greg Maffei, president and CEO of Liberty Interactive, told investors on a conference call on July 20th.
They’ll be a force to be reckoned with, too. Combined, HSN and QVC employ around 27,000 people across eight countries, with HSN broadcasting to 95 million households in the United States and QVC to 100 million. Even taking into account any overlap, the HSN-QVC amalgam will be the largest TV commerce entity in the world.
Like a retail Voltron, the forthcoming QVC Group, which will include the flash-sale website Zulily and Cornerstone brands like Ballard Designs, Frontgate, and Garnet Hill, will be North America’s third-largest multicategory e-commerce and mobile retailer, trailing behind only Amazon and Walmart.
Both HSN and QVC declined to be interviewed for this article, citing the pending regulatory and shareholder approval for the deal, which is expected to close sometime in the fourth quarter. But their union was perhaps inevitable. HSN’s sales declined 3 percent last year, while QVC’s flatlined. Both have had to deal with job cuts of up to 2 percent as more shoppers gravitate online to places like Amazon, which made $136 billion in sales in 2016 alone, or more than half of all online shopping in the United States.
The new QVC Group will rake in a more modest — if still sizable — $14 billion in revenue from shipping more than 320 million packages to an estimated 23 million customers worldwide every year, according to Mike George, president and CEO of QVC.
“Our new group will bring together QVC, HSN, Zulily, and the Cornerstone brands to create a premier global retailer with extraordinary reach and unlimited potential,” George, who will lead the coalition, said in a statement. “Together, we will define a new generation of shopping that combines commerce, content, and multi-platform engagement to change the way she shops — all the while retaining the uniqueness of our well-known brands and continuing to build on our distinctive legacies.”
And what a time to do it.
The retail landscape has shifted significantly since HSN debuted as the Home Shopping Club, a local cable channel in Pinellas County, Florida, in 1982. The idea of a televised sales pitch for consumer products and services was a ballsy gamble that turned into a roaring success. QVC, which stands for “Quality, Value, Convenience,” followed in West Chester, Pennsylvania, in 1986. The first item QVC sold, a $11.49 shower radio, helped the company reap a record $112 million in its first year.
But then the internet — and Amazon — happened.
As the “Everything Store,” Amazon’s domination of the retail space has been nothing less than an onslaught. The online juggernaut’s outsize influence reverberates across Middle America, where former behemoths like Macy’s and Sears grapple with tumbling sales and a growing number of storefronts lie vacant in increasingly hollowed-out malls.
Gallons of ink have been spilled over recent years to explain why the media-dubbed “retail apocalypse” is happening, but the phenomenon largely boils down to the fact that millennials and Generation Z crave different things than baby boomers do.
Data from the US Department of Commerce reveal that 20- and 30-somethings, now in their prime purchasing years, are more likely to throw their cash behind experiences — eating out, vacationing out of town, indulging in the latest “wellness” fad — rather than physical goods. When they do shop for things, they tend to head online.
Digital is growing at a breakneck pace. E-commerce sales made up 9 percent — or about $111 billion — of retail sales totalling $1.3 trillion in the second quarter, according to the US Census Bureau. A third of of these come from mobile devices, one study claims.
Television commerce will also have to wrangle with emerging technologies. We can shop while scrolling through social media such as Pinterest, Facebook, and Instagram, or by barking orders at voice-controlled speakers like Amazon’s Echo and Google’s Home.
Then there are the so-called “cord-cutters.” By this year’s end, 2.2 million American adults — a 33 percent increase from 2016 — will pull the plug on cable or satellite TV in favor of Netflix, Hulu, Amazon TV, Roku, and other live-streaming or over-the-top platforms, according to eMarketer.
For an industry whose primary medium is the airwaves, this turn of events is nothing short of seismic.
HSN’s core customer is female, aged between 25 and 54, and makes upward of $60,000. QVC describes its base as one that “spans virtually all socio-economic groups,” but more often than not, she’s a 35- to 65-year-old woman with a “somewhat above-average income,” somewhere between $50,000 and $250,000.
Still, their live TV model relies heavily on aging baby boomers, which isn’t sustainable in the long term. To maintain their audience, both networks have had to reinvent themselves to appeal to younger shoppers.
“QVC and HSN are kind of like the brand Macy’s: Do they attract a 20-year-old?” says Marie Driscoll, an industry consultant at Driscoll Advisors. “And the way they can attract a 20-year-old is by having brands that 20-year-olds want.”
HSN and QVC have have been making the pivot to digital platforms for some time now, with various degrees of success. QVC.com launched in 1996; HSN.com in 1999. They’ve both started streaming their shows live on Facebook, reaching up to 15 million people in QVC’s case.
HSN reported last year that digital transactions now make up 55 percent of its business. Of its online purchases, 45 percent were made on a mobile device. Similarly, QVC derives half of its global revenue from e-commerce, with 60 percent of that stemming from mobile sources.
But broadcast retail isn’t so different from e-commerce, argues Pamela Danziger, a market researcher at Unity Marketing,
“A misconception about TV shopping is that it’s somehow a different retail channel and different from e-commerce, but it’s an early form of electronic shopping, being delivered via TV directly into people’s homes,” Danziger says. “With the internet now expanding into video presentations, you might say that e-commerce is actually catching up to TV shopping in reaching their markets through all the experiential capabilities available.”
HSN’s digital push was spearheaded by Mindy Grossman, who joined the company as its CEO in 2006 but left this April to run Weight Watchers International. Grossman is widely credited with resuscitating HSN at a time when it was struggling and a “very distant No. 2 to QVC,” Grossman said.
Under her guidance, HSN replaced generic products with popular brands like Sephora and 7 for All Mankind and freshened up its set dressing. It partnered with more culturally relevant celebrities, like Nicki Minaj, Sarah Jessica Parker, and Serena Williams. It shored up its e-commerce presence, uploaded videos on Youtube and Facebook, and splashed #goalworthy looks on Instagram. It created themed shopping events around the debuts of major Hollywood blockbusters like Wonder Woman, for which it trotted out gold cuff bracelets, chevron-decked Betsey Johnson backpacks, and a five-piece “Love Truth Beauty” cosmetics set by Benefit.
Crucially, HSN dialed down the pushiness of its pitches and focused on engaging its audience with an aspirational “best girlfriend” attitude. “It's not just a transactional relationship. It becomes an emotional relationship,” Grossman told Forbes.
QVC is also working to promote customer engagement during on-air segments. In August, the network asked its viewers to download YouCam Makeup, a free augmented-reality app that allowed them to virtually “try on” a selection of Laura Geller New York cosmetics before committing to a purchase.
A few years ago, it launched a tablet app — dubbed “Second Screen” — that syncs up with the TV show. Viewers can use the app to purchase items in real time, send questions to on-air hosts, and even obtain recipes for dishes prepared live on the show.
In perhaps its biggest grab for millennial dollars, in 2016, QVC debuted Beauty IQ, the “world’s first live multi-platform network dedicated to beauty.” Viewable 24/7 in more than 40 million homes across the country through distributors such as Dish, DirecTV, and Roku, the social, retail, and media machine features brands, experts, and influencers, the latter of which are driving more sales than ever.
If there’s one thing these TV juggernauts know, it’s how to connect with their customers, Driscoll says.
“They have watched how audiences react to a salesperson or a designer or the creator, discuss the product, and they all wear little ear mics and people in the television control booth will say, ‘We're getting zillions of calls on the red blouse, so pick up the red blouse and turn it,’ so they really have institutional knowledge on how to do this,” she says. “Institutional knowledge that department stores don't have and that online retailers don't have, including Walmart and Amazon.”
Even as the competition over e-commerce dollars grows more pitched, “discovery platforms” like HSN and QVC remain more vital than ever, says Eric Feng, founder of Packagd, a startup whose first app, Unboxed, capitalizes on the popularity of “unboxing” videos, a Youtube genre where the “host” painstakingly documents every step of the product unpacking process, to move merchandise.
“Amazon is such an amazing service for the utility of shopping. You can find what you want immediately and get it within two days.” says Feng, the founding chief technology officer of Hulu and the former CTO of Flipboard. “But Amazon is not an experience set up around the discoverability; the entertainment, the joy of shopping.”
The home-shopping world knows that when it comes to crafting customer experiences, it has the Amazons of the world beat. Content — and context — will remain king.
“TV shopping is able to deliver a truly up-close and personal experience to its customers that Walmart and Amazon can’t match; today in retail, success is less about what you sell and more about how you sell it,” Danziger says. “And TV shopping delivers on all these counts: making shopping a form of entertainment and having that personal connection. Plus, its presentation format allows the hosts and the presenters to tell the story of the product, elevating the product and capturing the shoppers’ imaginations.”
It’s the fusty notion of linear, non-time-shifted television, however, that needs to change, Feng says. Millennial and Gen Z consumers don’t want to be tethered to a single device; neither do they want to to be bridled to a single time slot.
“It's just not the dominant way that they consume their media,” Feng says. “They prefer mobile and they prefer asynchronous on-demand.” The shopping experience of the future is going to have to adapt to that, he adds.
Even TV as we know it is rapidly changing, says Marvin Segel, chief operating officer at StarShop, a celebrity-curated mobile-shopping platform that might be described as HSN/QVC 2.0.
“Let's say you have a 40-inch, 44-inch flat screen. People still refer to it as a TV, but it's really not a TV, it's a giant computer monitor because you're feeding stuff to it from your phone, from Roku, from Apple TV, whatever you tend to use,” Segel says. “And I believe that's going to change even more and what we know as TV will not be the same.”
Segel knows what he’s talking about. It was his father, Joseph Segel, who founded QVC all those years ago, after all.
“Shopping needs a reboot, whether it's brick-and-mortar or TV shopping,” Segel says.
QVC, as helmed by George, isn’t averse to change — to a certain point. Because while e-commerce is efficient, it’s also “joyless,” he says.
But to face this brave new world that’s looming over the horizon, HSN and QVC need each other more than ever.
“We can’t begin to imagine what the future of augmented reality will mean for our world; we can’t begin to imagine what conversational commerce [through chat and messaging apps] will mean,” he told employees at HSN’s headquarters after the stock deal with Liberty Interactive was announced. “The continued mobilization of the world, personalization. What happens when we come together, when instead of trying to innovate on our own, we do it together?”