The QVC and HSN Merger: Not Your Usual Retail Story

A recent blockbuster deal in the retail arena was the announcement that TV home shopping giant QVC was buying its main rival, the Home Shopping Network (HSN). This comes at a time when the audience for TV home shopping is in decline, causing some analysts to see the merger as a “last gasp” effort of a dying format. However, these analysts are missing the bigger picture.

What the naysaying analysts fail to realize is that QVC now derives almost half its revenues from e-commerce. Moreover, because its sales experience is delivered via a unique live video format, the combined QVC/HSN has distinct advantages over other types of online retailers, including the major retail store disruptor Amazon.com.

As Adweek reported recently, QVC has quietly become successful with streaming audiences. QVC delivers live streaming video to its fans via mobile devices, its website, Roku and Apple TV, and Facebook, including dedicated pages for the retailer’s most popular hosts. QVC owns all of the video it shows and can repurpose it across platforms, on-demand or simulcast live.

E-commerce accounted for $4 billion of QVC’s $8.7 billion in annual revenue in 2016, and it represents 48 percent of its global revenue and 54 percent of its total U.S. revenue in the first quarter of 2017. HSN, a $3.5 billion company, also has been making a similar successful shift to e-commerce. Former HSN CEO Mindy Grossman said the company was building its brand with a continued emphasis on digital, which now represents 55 percent of its business, with mobile accounting for 45 percent of digital revenues.

Polar Sales Techniques

The merger of QVC and HSN brings together two different sales techniques. Unlike HSN’s aggressive approach, QVC sellers are more laid-back and easygoing. Hosts and guests are given an education in “backyard fence” conversation, so the viewer’s experience is like listening to two friends talking rather than a full-frontal sales assault.

As Jake Rossen noted, another major reason for QVC’s success is its ability to maximize its live presentations. Because QVC’s control room operators see sales statistics in real time, they can correlate spikes in sales with host and guest behaviors that triggered the responses, and then can cue the sellers during live pitches, via earpieces, advising them to repeat any action, phrase, gesture or clothing style to which viewers respond positively.

Examples include Ron Popeil getting sales spikes by jumping in the air during his pitches, and Joe Sugarman boosting sales by wearing a loud tie while pushing BluBlocker sunglasses. QVC host David Venable gets a boost when he does his happy dance.

Retail in Disarray

The fortunes of traditional brick-and-mortar retailers continue to worsen, with a surge in bankruptcies and a continuing shuttering of stores. As Fortune pointed out, “the result has been declining sales at many major retailers (particularly department stores) and store closings by the hundreds.”

There were nine retail bankruptcies in 2016, and already that many in 2017. J.C. Penney, RadioShack, Macy’s, and Sears have each announced more than 100 store closures. As The Atlantic reports, “From rural strip malls to Manhattan’s avenues, it has been a disastrous two years for retail.”

The retailers that are thriving are the new breed like Bonobos and those like Wal-Mart that have been able to make a shift to e-commerce.

Retailers today must balance their e-commerce and brick-and-mortar efforts to stay viable. In a sense, QVC is facing challenges similar to those of its brick-and-mortar store brethren. Both are seeing erosion of their customer base.

But for QVC/HSN, the equation is simpler because rather than balancing physical stores with e-commerce, the medium of customer experience for it is video and all virtual. It’s just a matter of which video channels it needs to devote the bulk of its resources.

Different Animals

While Amazon is undermining the businesses of many major retailers, QVC and HSN are different animals. Amazon’s magic is in the reviews, discounts, and easy ordering and return systems. The product pages viewers see on Amazon are static, however. QVC and HSN have a different formula.

QVC’s and HSN’s magic is in carefully honed live video formats. They capitalize on the charisma of their sellers, who are able to coax an audience into impulse sales through live on-air pitches.

The winning sales experiences, aided by analytics, are translatable from TV to internet streaming video formats on websites, Facebook, mobile phones and other streaming channels.

Bright Future

The success of QVC and HSN showed there was an audience for home virtual shopping via a live TV format. While the TV audience may be declining as younger viewers move online, the success of QVC’s and HSN’s e-commerce efforts show the appeal is still there; what's changing is the medium through which the virtual shopping experience is delivered.

Today’s streaming video shopping experience is through tablets, mobile phones, laptops and PCs. Immersive formats like virtual reality and augmented reality could give future QVC and HSN viewers even richer live experiences.

Meanwhile, as long as TV continues to deliver billions of dollars in revenues, it will remain a viable medium. Over the long run, if TV continues to dwindle significantly, QVC/HSN may have to shift completely to streaming internet channels. However, with TV becoming increasingly digital and user attention shifting to internet viewing, the two formats may ultimately merge. Whatever the ultimate fate of TV becomes, QVC/HSN has a solid future delivering its unique brand of shopping experience within the video realm.

Bart Mroz is CEO at SUMO Heavy, a digital commerce strategy firm.