HOME SHOPPING Special Report for Television Business International April 1999 MIPTV Issue
TBI SPECIAL REPORT: TV HOME SHOPPING
TV HOMESHOPPING
By Budd Margolis
MIT Consulting
Introduction
Home shopping channels in the USA, were once the recipient of
constant ridicule until Barry Diller caught on to the potential of this
powerful retail distribution channel and bought into QVC. Although his
tenure at QVC lasted a brief two years, his positive effect on the
reputation of the electronic retail industry continues. QVC's sales of
some $2.025b in 1997, places the channel in the enviable position as the
worlds leader in the $12b global TV home shopping industry or as they
prefer to call it, electronic retailing. Diller has since moved to head up
USA Networks which controls the Home Shopping Network, America's
number 2 shop channel with just over $1b in annual sales.
Today, in some way thanks to Barry Diller, TV home shop
channels operate on every continent and in the worlds major markets.
Competition between shopping channels is driving the industry and sales
further. Although a small niche of a small but growing international mail
order and home delivery market, TV home shopping's future has never
looked so bright.
Many home shop channels are naturally moving into interactive
retail and are operating web sites which have proven to be a bit hit with
home shopping consumers. The benefits from an already existing loyal
customer base and the power of cross-promotion on the TV channel
makes for a powerful and successful formula for direct marketing.
There is no question that the convergence with digital television will
extend the market and channel availability for TV home shopping.
Interactivity will greatly increase viewer to buyer ratios as well.
People will not spend more, they will however shift a larger proportion of
their disposable income away from traditional retail to non-store or
multimedia/interactive retail.
Webcasting will help provide virtual shop channels for
manufacturer's as well as medium to small sized companies. Point and
click ordering will become widely accepted even though mass
deployment is still perhaps ten years away.
Although shop channels proliferate around the world, few shop
channels operate efficiently and many companies have not yet figured out
the proper balance between TV and Retail that is required to succeed. In
some cases, strategic mergers with mail-order companies has proven to be a very successful way to enter into a business that relies on
sophisticated and expensive logistics and fulfilment.
Back in the middle of 1992, 60 companies had entered the TV home
shopping business, and it did not take long before 58 companies folded
up. This failure was due in part, to a lack of expertise in the daunting task
of assembling a distribution system via cable or broadcast channels. The
other critical aspect of success is a steady, large and varied mix of
merchandise.
TV home shopping is a fast growing industry and it is spreading to
every TV screen across the face of the earth. Broadcasters recognise that
this is a growing part of the content mix that they deliver to the audience.
While short and long form DRTV or infomercials have suffered wide
swings in profits and losses, for those TV shop channels that operate
efficiently the market provided steady and prosperous growth.
This report takes a look at how this industry developed, the current
state and trends of global home shopping in various locations around the
world, a focus on the largest segment of home shopping in the United
States as well as a look at the trends and direction the future of the
electronic retail industry is likely to present.
1998 A Sales Record year!
The expected, predicted and projected downturn in retail sales in the
last quarter of 1998 did not really materialise. The summer ended well
and Christmas 98' produced excellent results for shopping channels
around the world. Despite the debate over the President's impeachment,
tensions with Iraq, the bombing us two US embassies in Africa and other
events such as severe winter weather brought more eyeballs to the TV
and resulted in greater sales. Quit often electronic retailing bucks the
trend of traditional retail and performs well in adverse conditions. Shop
channels in Japan and Korea for instance are doing well despite the
economic problems and downturn in retail sales.
Home Shopping Network set an all time sales record on October 19,
1998 with a Hi-Tech Home event that included an Intel Pentium II 350
megahertz PC - the fastest, most powerful computer offered on The
Home Shopping Network to date. With more than 13,000 units sold, the
computer was a complete sell-out it rang up its largest sales day in history
on Saturday, October 17 with sales of $24. m. Those sales best the last
sales record by over 50 percent. A colour flatbed scanner and a Sharp
plain paper fax also sold out during the event.
HSN's biggest month in history was November with $133m in sales,
which marks the first time HSN has broken the $100m record in monthly
sales.
25,000n units of a 14-carat gold pendant shaped like an angel, total sales
$900,000
20,000 telescopes at $89 a piece
It also sold $5.1 million in 400 megahertz computers with a 17-inch
monitor
(HSN reports net sales of products, which includes cancelled orders and
returns.)
QVC , set a sales record for the week from Nov. 30 to Dec. 6, with
$109m in gross sales and 1.6m orders. During the same period last year
$85.5m and 1.4m orders were made. During its record-breaking week,
QVC sold
108,000 units gross of its 14-carat gold hoop earrings, priced at $40 a set.
38,000 units of its sterling silver four-piece necklace and bracelet box gift
set for $37.50.
30,000 units at $28.11 a piece George Foreman Grille.
90,000 units of its 51-piece magic marker and colouring set for kids at
$19.17 a piece.
36,000 units of the 12-piece Winter Wonderland candle collection sold at
$44.83
16,000 units of the Pionex computer sold at about $1,400 a unit.
GLOBAL TV HOME SHOPPING
Just about every country has some form of TV Home Shopping. The
popularity and growth of satellite and cable has been instrumental in
home shopping development as many countries still regulate the medium
as a commercial channel which runs afoul of the terrestrial broadcast TV
regulations. Throughout the world there is an abundance of enthusiasm
and problems, but it appears that many operations are learning from their
mistakes and overall growth in this part of the industry exceeds 15% per
annum. Overall global electronic retailing is estimated to take in about
$12b USD of which $250m USD will be from associated web sites.
France was the first country outside of America to embrace the concept of
televised home shopping and at one time four operations were in
existence. Regulations have often been the major handicap for this new
retail format but new distribution means have helped. Up to two and a
half years ago, the Canadian shopping channel could only show still
images. Today, web streamed video can reach across borders at a
fraction of the cost of a transponder and quality improves it seems daily.
It is impossible to list all activity or to acquire accurate date from all the
companies contacted. Some operations are very small such as Zee TV in
India which operates Asia Sky Shop with annual net sales of about $3.5m
USD. In Japan, I estimate TV Shop channel net sales exceed half a
billion US dollars, but no company would provide official figures.
All companies interviewed did agree that web sales would experience
unusually high growth and a growing proportion of over all sales.
Electronic Retail Association is the international organisation for the
DRTV/home shopping industry and they host a helpful and informative
web site with many industry contacts and links: http://www.retailing.org
UK
QVC UK net sales:
94' 95' 96' 97' 98' 99'
£17.5m £36.2m £58m £101m £150m (EST) £190m (EST)
QVC has been operating in the UK since October 1993. Gross sales for
1998 are forecast at some £150m and the channel grows from strength to
strength. Certainly the investment in a call centre and warehouse have
helped QVC meet the projected demand while maintaining desired levels
of quality control. BSkyB owns 20% of QVC UK and the company
announced plans to join up with the BSkyB SkyDigital satellite digital
television system later in 1999. The other interactive retail development
occurred last November when QVC UK opened their web site for sales.
QVC UK benefits greatly from their close co-operation with the parent
in the States and QVC Germany. Products and guests with proven home
shopping sales success can be rotated around to the channels and what
sells well in one country usually sells well in another. And for the
manufacturer who is looking to eventually launch in the retail stores, TV
home shopping provides a great deal of effective exposure. Typically
products that have been show on TV have a high impact when seen on the
shelves as most people tend to want to feel before they buy.
Another advantage QVC has over competitors is their vast knowledge of
operating a large and successful channel. QVC regards every aspect of
the electronic retail process as a science and follows proven techniques
that have been developed over tens of thousands of hours of live home
shopping sales experience. The detail is amazing as every product is
tested for quality and viability. The test continues with the first few
airing some of which the American parent will try in the middle of the
morning. When a product is presented, at what time within the hour, the
guest, the presenter and what type of demonstration is given are all
factors that contribute to sales success.
What other retailer could promote Christmas on the 24th of July? The
concept was brought over from the States and does extremely well. Total
sales for basic Christmas lines was just over £100,000 for that day but
making the day an event draws larger audiences and produces more sales.
Xmas in July Best Sellers
100 Musical Lights £18,000
Light Up Trees £12,968
Silhouettes £13,458
The Christmas in July Today's Special Value (TSV) was an Animated
Christmas Character which sold for £16.00 and accounted for 27% of the
days total sales. Seventy four percent of the 15,000 items were sold for a
total of £175,000 in sales The TSV is one specially priced and promoted
product that accounts for between 30-40% of the days total sales. The
TSV is shown 6 times in a day for slightly longer duration than the norm.
TSV Record: June 14th, A4 flatbed scanner that sold for £64.97 ($108
USD) produced the first £1m pound ($1.65m USD) TSV. Between the
hours of midnight and 2:00 AM, 4, 500 units were sold. By 10:00 Am
some 45% of the 15,500 units. The product sold out by 19:00 hours.
Another verification that PC's, peripheral equipment and software sell
well on TV.
October 29th, QVC sent a presenter to Florida for the 2 hour John Glenn
shuttle launch special programme which was seen on QVC in the US, UK
and Germany. The best selling product was a telescope which took in
over £20,000 and an Apollo Stainless steel watch which generated £4,450
in sales.
WEB SITE: www.qvc.uk.com
November 15th marked the start of competition for QVC with the digital
terrestrial TV system that includes a channel called Shop! The Home
Shopping Channel which is a Joint venture between the Granada Media
Group and Littlewood's Home Shopping Group. Since the launch cable
uptake has exceeded expectations and sales results have been very
positive. Certainly the competition will grow the industry and affect
QVC UK severely as it does in Germany.
WEB SITE: www.shop-i.co.uk
SkyDigital began a bit earlier and has signed up dozens of retailers for
its interactive sales services.
Last September, Britain's upscale Harrods department store tried a few
hours of recorded home shopping by selling its goods on the CNBC
Europe satellite channel. ``Gold Card Television'' consisted of two, two
hour programmes which was broadcast over the weekend throughout
Europe. The programmes included a travel show, food segment and a
fashion magazine program, as well as an opportunity to buy products
selected by Harrods. Results were not released but so far, the experiment
has not been repeated.
BELGIUM
L.T.A. started broadcasting in May of 1998 on cable which has a 90%
reach across Belgium. PBRK a majority shareholder developed L.T.A.
which is not a dedicated channel, but they do operate some home shop
style programmes and live hours have grown from 2 to 4 a day in the past
year. Estimates for 1999 sales are around 175m FB. The situation in
Belgium is that the population is split between those who speak French,
about 45% and those who speak Flemish 55%. Therefore, L.T.A. decided
top launch a Flemish language channel called Shoplijn.
Shoplign, a Flemish language shop channel was formed in September of
1998 and is now broadcasting 3Hours a day on the n)1 Flemish
commercial station VTM. Shoplign estimates for 1999 are 200m as some
100,000 customers are expected to purchase an average of 2,000 FB.
PBRK, the majority holders of L.T.A. created a 50/50 JV with the
Flemish media group Medialonge.
GERMANY
Although H.O.T. began a year earlier than QVC Deutchland GmbH, the
first year was mostly recorded material which does not sell as well as live
programming. Today H.O.T. operates 16 hours a day of live
programming. Today H.O.T. and QVC Deutchland have similar audience
reach but H.O.T.'s outstanding performance can only be attributed to their
high quality products, presenters and production. In fact, H.O.T. is the
best looking shop channel in operation today.
HOT QVC
1997: 82m DM 20m DM
1998: 193m DM 92m DM
1999: 370m DM projected 190m DM projected
QVC Deutchland GmbH began broadcasting December 1, 1996 with
just 191 employees. Today there are 620 employees. Sales have
increased dramatically moving from DM 20m ($11.7m USD) in the first
3 quarters of 1997 to DM 55m for the comparable period in 1998. In
1998 the gross turnover grew by over 250% to about DM 92 million. We
anticipate a further 100% growth in turnover during 1999 and to become
profitable in the year 2000.
By the end of 1998 QVC had invested DM 120 million into their
infrastructure and are adding new customers at the rate of more than
30,000 per month. By the end of 1998, QVC had quadrupled customers
to over 400,000. Every week the phone centre in Bochum receives50,000
calls. The warehouse in Neuss ships 30,000 packages weekly and
delivery reaches customers in 7 to 10 days. Today, 25 million TV
households in Germany can watch QVC for at least 3 hours per day.
Cable FTEs (Full Time Households) have doubled to 6 million and with 8
million Astra 1d, Transponder 52 satellite FTEs brings QVC's German
signal distribution to some 14 million FTEs.
Recently a NRW Ministry of Economic quantitative customer study
showed a high acceptance and success for the QVC concept in Germany.
The survey found that nearly half of QVC's viewers watched the channel
up to 30 minutes a day, while 35 percent spend a daily hour with the
channel. Twenty percent watch for six hours a day.
The channel did struggle with wide variance in daily sales between
DM90,000 to DM300,000 daily last summer but this is a natural
adjustment that many shop channel start ups go through. There is a big
advantage to the steady supply of QVC US and UK products and guests.
QVC Germany occasionally mimics QVC UK's programming schedule
but not always the sales performance. QVC Germany made some sales
from the pre-launch programme for Windows 98' but unlike the US
parent, QVC Germanys sales for Windows 98' were weak. QVC USA
sold 4,000+ units in the first 60 minutes of their programme which aired
one month before the product launch. A promise of launch day delivery
for the product was made. QVC Deutchland also participated in the John
Glenn Shuttle launch sales programme from Florida with QVC USA and
QVC UK. This was the first time shop channels shared live event
programming internationally.
German H.O.T. or Home Order is part owned by Home Shopping
Network (HSN), 41,99 % Thomas Kirch, 33%, Dr. Georg Kofler, 15%,
Quelle Schickedanz AG & Co, 10,01 %Quelle the worlds second largest
mail order company, HSN and Pro Seiben Media Gruppe AG. H.O.T.
sales for 1997 were DM82m and projection for 1999, when the service
will begin profitable operation are for DM 370m. March 29th HOT has
some 900,000 active customers and recorded its best day ever with
DM4.1m in sales and 85% of the 12,000 calls coming through their call
centre. In Germany, H.O.T. and QVC are not available in the same
markets or cable systems so there is no face to face competition except
for those who watch via the Astra satellite. This situation may change
soon and it will be interesting to see the effects of direct competition on
sales performance.
www.hot.de went online December first with 270 different products.
ITALY
In the summer of 1998, HSN and Scandinavian Broadcasting System
announced a joint-venture to develop and operate HSN-SBS Italia, a
dedicated live home shopping channel for Italy. The channel will slowly
evolve from a start of 2 hours a day of live home shopping to what is
hoped will be a mostly live dedicated 24 hour channel. SBS is a $242m
commercial broadcast company based in Stockholm and they own 10% of
Rete Mia TV which can be seen by 14m of Italy's 20m television
households.
Italy will be a tough test for home shopping expansion. A very lucrative
market but one that is prone to a heavy competition and a wide variance
in consumer patterns based mostly upon regional differences. Italy also
presents a number of regulatory and business issues which must be
addressed in order for HSN/SBS to determine the continued viability of
the project.
Italy's television market is awash with numerous channels many of which
offer various formats of home shopping. Although specific sales figures
are not available, generally one can surmise that there must be a healthy
market and acceptance for the concept otherwise it would not be possible
for so many channels to exist for as long as they have.
Last November yet another shop programme "Shopping America" was
launched by a former general counsel for HSN.
JAPAN
Japan has a long tradition in home delivery as their first mail order
catalogues appeared some 100 years ago. With a time poor/cash rich
urban condensed society of some 125m all the factors are in place for
successful electronic retailing. The Asian economic crisis has eaten into
DRTV sales which have been declining since 1996. 1998 recorded the
first decline overall in Japan's DM sales since 1982. But TV home
shopping continued to show healthy activity although no company would
release sales results I estimate the TV shop channel market at some
$550m USD. One area experiencing a boom is with Japanese call centres
which continue their double digit growth and expansion. All of the
major trading companies, Mitsubishi, Sumitomo and Matsui have
embraced most forms of electronic retailing including TV home
shopping.
In April of 1998, QVC, and Marubeni Corporation, one of the largest
Japanese trading companies, announced their JV to deliver TV home
shopping to Japan by assuming equity investment positions in "Mall of
TV" (MOT). Marubeni's operations encompass domestic import, export
and offshore trade as well as investment activities; and range from the
development of natural resources to the retail marketing of finished
products. The company, which is engaged in building Japan's multimedia
television infrastructure, invests in CATV operators, satellite systems and
distributors of multimedia programming (TV programs, film, video and
software).
HSN and Sumitomo have a joint venture SHOP CHANNEL that first
went on air in November, 1996 and is now available in over 2.5 million
homes. The channel has experienced extremely quick growth despite the
current economic recession and sales have been reported as exceeding
expectations. This summer Shop Channel will move production and the
call centre operation in house and increase the amount of live
programming. The partnership of HSN with Sumitomo Corporation and
Tinta is proving to be most successful and productive.
TV SHOP Europe
TV-Shop has established a unique, European network of interconnected,
computerised telemarketing agencies and sales companies in 20countries,
which can serve customers on some 70 different TV channels, 90 radio
stations, a number of Teletext operators and Internet. Around 123 million
homes are reached via TV. The geographical coverage and household
penetration in combination with the systems for handling logistics and
transactions are of importance in order to exploit the economies of scale
that are generated by the use of these media for marketing.
In 1996 TV-Shop concentrated its resources on developing business in
the seven countries where new ventures were started at the end of 1995,
namely Russia, the Czech Republic, Hungary, Holland, Spain, Portugal
and Columbia. After winding up the project in Columbia, which did not
meet expectations, the remaining new markets account for some 30% of
the group's business and the units in such countries as the Czech
Republic, Holland and Portugal were already in profit during the first
financial year. The German market accounted for the largest growth.
TV-Shop recently signed an agreement with Eurosport, which gives the
firm access to late night and early morning hours for "TV Shop- The
Channel". TV Shop and Eurosport will also co-operate with the
development of internet shopping. The Eurosport channel reaches a
market of 80 million homes and 120 million people in 45 countries with
short and long form DRTV. TV-Shop Europe distributes goods on 20
European markets and has also recently started operations in the United
States. TV Shop has been operating home TV Shop programmes under
the title TVG for several years now. TVG is a home shopping channel
that sells on commission. The channel uses spare satellite capacity and in
1996 it shared a channel position with TV6 and broadcast spots on TV3
in Sweden. It seems unlikely that substantial growth will be seen in this
area without a dedicated channel and effort.
Fortunately, the company is well diversified probably due to the erratic
nature of the DRTV industry and has a "K-Tel" like operation for
compilation music CD's. TV Shop is part of the Modern Times Group or
MTG, which is controlled by Swedish media mogul Jan Stenbeck who
owns Kinnevik. Stenbeck is well known for saying "Our only strategy
regarding Internet is not to have a strategy," but recently an analyst has
cited that MTG is the most exciting internet stock in Scandinavia a
reputation for having missed the boat when it comes to the Net.
MTG has about 40 different Web pages. Its subsidiary MTG recently
launched CDON, a mirror copy of Swedish Net music retailer Boxman
TV Shop reported record first quarter profits in 1998 of 13m SEK ($
$1.61m USD) as turnover increased 41% against the similar period last
year. In 1997, TV Shop Europe reported a loss of 1m SEK.
The web site called Shoppers Club links to national sites for Austria,
Czech Republic, Denmark, Finland, Germany, Hungary, Norway, Poland,
Portugal, Sweden, Switzerland, The Netherlands and the UK.
WEB SITE: www.tv-shop.com
ISRAEL
C.E.D. The Home Shopping Channel is a small dedicated cable channel
operation in a small market and the best prospects are ahead as digital TV
and the Internet converges and this type of programming can reach global
niche markets. Until then, it is a difficult road for such a small company
and frequent management and ownership changes have resulted in
various concepts of home shopping being applied. At first CED
attempted a traditional QVC style approach but slow sales which are
common in the first year lead the owners to make radical changes and
cost savings. Sticking with the original concept would have borne fruit
but for the fact that their business plan stated that there would be profits
in the first year of operation. CED was originally a group of seven
companies. Today Dahaf, the country's largest advertiser and the Golan
Globus Studios own the channel. CED was the winner of a Government
Communications Ministry bidding contest. They made a great
presentation but the channel has failed to live up to its original brief and
today operates with their presenters spending a day or two making
recorded presentation/demonstrations and then performing live segues
between the recorded single product inserts.
AUSTRALIA
TVSN has gone through a very large shake up and in the past year they
have cut most of their staff in the drive to make some money. After
burning through $100m USD in their first three years of venture capital
mostly from the Focus and Prudential Asia Group's based in Hong Kong,
it is now time for this operation to shape up or fold down. The original
concept of one global shop channel servicing the world was perhaps ten
years ahead of its time and a real disaster. Credit card penetration as well
as viewership is not yet at the level required to make a return on such a
large, complicated and expensive concept as global shopping. TVSN has
shut down operations in some 15 countries and have decided to
concentrate on the Australian and Chinese markets. The strategy is to
develop a facility in Shanghai and cut down on English programming
while extending Mandarin language output. Even without the Asian crisis
this concept was in trouble but it's anyone's guess whether the
restructuring will work. Losses have been cut from A$4m to A$1m per
month and management is hopeful they can reach operational break even
by the end of the year.
KOREA
KOREA HOME SHOPPING CHANNELS
Net sales (unit : USD)---W1300 = USD 1
1996 1997 1998 1999
LGHS: 12.3m 56.5m 177m 358m (EST.)
CH 39: 14.8m 64.6m 169m 375m (EST.)
Annual Market Volume for Korean TV Home Shopping (unit: USD mil.)
Year 95 96 97 98E
Amount $2.6m $25.8m $121.1m $461.5m
Annual average growth rate: 460%
SOURCE: 39 shopping, LG home shopping, Oct. '98 Korea Economic
News/ Maeil Economic News
LGHS, part of the Choebol chemical and electronics conglomerate LG,
reported 1997 net sales to be $101m USD while their competitor CH. 39,
which is associated with the American ValueVision shop channel
reported $100m USD in the same period. Considering that there were just
2.5m homes that were connected to the cable system and the fact that
sales continued to grow during the 4Q when the Asian economic crisis
struck, the results are remarkable and reconfirms that TV Shop Channels,
mail order and interactive retail often benefit from economic downturns
and low performing traditional retail trends. LG's shop channel benefits
most from the ability of the TV programming to drive sales through to
their companion mail order catalogue.
Korean TV Home Shopping Survey Result
Home Shopping channel' audience rating was under 2% in the 27 cable
channel and recognition rating was also low in 10%, but 49% of cable TV
viewers have the purchasing intention and 77% of home shopping
channel viewers interest in the purchasing.
What are the decision factors for purchasing on a TV shopping channel?
Price: 60%
Variety/uniqueness: 50%
Convenience: 37%
Viewing ratio by day
Weekday :80%
Weekend: 20%
Most popular hours for women to watch was between 14:00 and 16:00 hours
Most popular hours for men to watch was between 21:00 and 22:00 hours.
Average viewing time per day: 11.5 min.
Average customer sex/age: Woman 30~50 age
Average customer purchase price : USD $62
Average jewellery purchase price: USD 154
Average repeat purchasing rate in 1997 : 6.7/year
The survey also showed that Channel 39 (Samkoo) shopping lead LG
home shopping in every area (audience rating, recognition rating for
channel and preference rating) except sales.
SOURCE: LGAD's survey for TV Home Shopping in Jan. 1998
WEB site for LGHS : www.lghs.co.kr
WEB site for 39 Shopping : www.i39.co.kr
CHINA
There are as many as a dozen dedicated and limited exposure TV home
shopping channels in various stages of early development. Results around
the market have been very positive despite a recent government
crackdown on direct marketing operations. There is no doubt that this
market will take off but in the immediate future one can expect some
volatility. China's retail market presents some risk which is always
fuelled by that ever present belief in the enormous potential of the
market. many parts of the country have inadequate retail infrastructure
which is a wonderful opportunity for home shopping but delivery and
payment systems lag as well and incomes across China vary enormously.
Among the better run TV home shop operations is China Shopping
Network (CSN) which began in the summer of 1997 and reports a reach
of some 345m people across 18 markets. All programming must be
approved before hand so there is no live TV shopping in China. Sales in
1998 were $120,000 USD and estimates for 1999 are for $3.2m USD.
The entire Chinese DRTV industry topped the RMB 1b Yuan ($120m
USD) for 1998. CSN's affiliate stations accounted for some 689m Yuan
($85m USD) of that figure. CSN projects continued strong double digit
growth for 1999. The best selling product last year was the Stiguard
(TM) Multi-Function Walking Stick. Fashion jewellery, a category that
made up nearly fifty percent of the products available is being reduced as
the market for fine jewellery grows to fifteen percent. Electronics, beauty
and fitness products are growing categories as well.
WEB site: www.china-tv-shop.com
BRAZIL
The Real has been devalued by some 67% (as of the end of February)
during the recent economic and fiscal crisis but is still among the worlds
top ten economies. The economic problems may prove to be a benefit to
local direct marketers as direct marketing and home shopping in
particular grows in bad times. Sales of now hyper-inflated foreign goods
which fuel TV shopping are about to collapse.
Brazils powerful TV network Rede Globo operates Shoptime on their
Globo/Globosat cable and satellite system. Shoptime operates as a
dedicated TV shopping channel with fixed schedules and thematic
programmes selling mostly unique and imported products. One major
department store, Mappin has a programme that sells electronics on the
weekend. This type of programme is also effective in driving traffic to a
store. The other programmes are themed around particular product
groups such as computing, kitchen, jewellery.
One area of particular success is the erotic products show "De Noite na
Cama" (On Bed by Night). The programme airs after 1:00 AM and is
presented by a former Brazilian sex symbol, the 40 + year old former
model and movie actress Monique Evans. Although sales are margin, the
viewing figures are fantastic. Erotic programmes have been tried in the
USA, UK, Germany and France as well and usually the results are very
positive.
Launch: November 1995
Live hours: 5 per day
1996 sales: $13m USD
1997 sales: $29.4m USD
1998 sales: 39.4m USD
Estimates for 1999 sales: $41m USD
Record day: $230,000 USD
Record programme: $41,000 USD
Average product price: $120 USD
Average customer spend: $160 USD
Active customers: 250,000 (those who have purchased within previous 12 months)
WEB Site: www.shoptime.com.br
There is another format called Shoptour which is peculiar to Brazil.
Other countries such as the USA and China have conducted tours of
shops but there is no known dedicated channel that does this. Shoptour,
rents about 90% of a UHF channel called CBI, which is also distributed
by cable and satellite. Shoptour travels to a store, car dealer, repair shop
or restaurant and produces a one to five minute promotion. One half hour
thematic programmes are then scheduled which might depict car dealers
around Sao Paulo and every five minutes a different car dealer shows off
three cars, displays a card with address and map as well as their phone
number. Since Saturday and Sunday are the most active for Brazilian car
hunters, the channel is packed with such programmes. The channel has
also sold a $300,000 USD helicopter in the past. To date, Shoptour
operates in the Sao Paulo region which has a population of some 16m and
is the most profitable region in the country. In July, Shoptour plans to
expand and launch their own channel with regional channels in cities
around the country.
Launched: 1988
Viewers per hour average: 120,000
Live hours: 0
Recorded hours: 23
Best sales hour Monday to Thursday: 22:00 to 23:00
Friday to Saturday: 11:00 to 12:00
Sunday: 23:00 to 00:00
Most popular category: 30-40% of shows are for computer and mobile phone stores.
WEB site: www.shoptour.com
U.S.A.
QVC is still very much the dominant player in the world but much of the
recorded growth recently in QVC, and the stable sales at HSN can be
attributed to income derived from the success of foreign joint ventures.
The US is a mature market and expansion to virgin territories is paying
off. It takes quit an investment and commitment but, until interactivity
becomes a mass market quantity domestically, the often unstable foreign
markets so far are starting to produce.
QVC's web strategy differs radically from HSN. iQVC is the internets
top general merchandise retailer with over $50m in 1998 sales. QVC
integrates their web concept with the TV channel whereas HSN formed a
separate entity which sells computer hardware mostly and has met fierce
competition and mediocre sales success.
QVC has learned that the American concept works abroad but
Germany's H.O.T., HSN Japan's Shop Channel and Shop! in Britain will
prove that locally orientated and produced operations can achieve even
greater results. QVC is owned by Comcast, America's second largest cable operator.
QVC net sales:
94' 95' 96' 97' 98' 99'
$1.4b $1.68b $1.83 $2.025b $2.35 (est.) $2.6b (est.)
WEB site: www.qvc.com
HSN net sales: $1b (consistent over past few years)
In January, The Home Shopping Network (HSN) announced their best
sales month in history with gross sales for the month were in excess of
$160 million, representing a strong double-digit increase compared to the
same period one year ago. December was the second consecutive month
that Home Shopping has broken sales records. This follows October,
1998 which saw the largest sales day in the Company s history. Often
operating in the red, the past year has seen a healthy turn around in HSN's
profits and their purchase of Lycos may assure them a place in the future
whatever trends evolve.
HSN's 1998 best Sellers
· Barbie: Home Shopping sold 100,000 Barbie dolls during the month,
· more than half during The Barbie Spectacular, the single biggest
· Barbie event in the Company s history
· Computers: HSN sold and shipped over $4.3 million of computers
· during the month of December
· Jewellery: more than 775,000 pieces including 350,000 rings, 300,000
· necklaces and 125,000 pairs of earrings
· Beanie Babies: more than 550,000 sold in one month
· Cookware: 280,000 pieces were sold, as Home Shopping continues as
· America s largest seller of stainless steel non-stick cookware
· Telescopes: a key gift item this holiday season, Home Shopping sold
· more than 15,000
· Vitamins: Home Shopping took 120,000 orders for vitamins as
· consumers resolved to be healthier in 1999
Home Shopping Network, a USA company (NASDAQ:USAI),
pioneered the electronic retailing industry in 1977. Its 24-hour
programming reaches 70 million households via cable, broadcast
television and satellite dish. HSN is America's largest seller of
gemstones, designer collectible dolls and stainless steel non-stick
cookware. Home Shopping Network recently launched "Home Shopping
en Espanol" a joint venture with the American Spanish language
broadcaster Univision.
WEB site: www.hsn.com
Value Vision net sales:
1994 1995 1996 1997 1998 1999
$37.6m $53.9m $88.9m $159.4 $217.9M $275M (EST.)
ValueVision International, Inc announced that its television home
shopping operation achieved a pre-Christmas December sales increase of
70% and a pre-Christmas fourth quarter sales increase of more than 50%,
including a record $9.2m in merchandise shipments for the week ended
December 20, 1998. ValueVision sells mostly jewellery items which is
the strongest single product category on TV home shopping.
For the nine months ended October 31, 1998, net sales fell 13% to
$137.8m. Net income fell 77% to $4.2m. Revenues reflect lower
catalogue sales due to the downsizing of HomeVisions. Net income
suffered from lower gains on the sale of broadcast stations, a $5.7m
write-down expense and a $3M restructuring charge. The stock quote is
VVTV.
WEB site: www.vvtv.com
Shop At Home:
1996 1997 1998 1999
$40.0m $68.8m $100.5m $150m (est.)
For the six months ended December 1998, net sales rose 66% to $73.3
million. Net loss applicable to Common totalled $693 thousand vs.
income of $1.1m. Revenues reflect a 66% rise in full time equivalent
cable households. Net loss reflects the commencement of interest
payments on the $75 million in 11% notes issued March 1998 and due
2005.
Sept. 4, 1998--Shop At Home, announced it set two new sales records,
the largest single hour and the largest overnight period. The Company
posted $216,000 in sales between 3:00 a.m. and 4:00 a.m. on September 3
and posted almost $600,000 in a six-hour period, a new record.
Shop At Home's overnight period usually sells sports-related items and
other collectibles and caters to a male audience. Shop At Home attributed
the new records to increased demand for sports-related items partially
fueled by the electrifying race between Mark McGwire of the St. Louis
Cardinals and Sammy Sosa of the Chicago Cubs to break Roger Maris'
record of 61 home runs. Shop At Home sells many collectable items
which is another strong product category as once people start top collect
when can one stop?
Shop At Home, is the second oldest American shop channel and their
sales make them the fastest growing electronic retailer in the country.
They are also the 19th largest broadcaster in terms of market coverage,
with a reach of 60m. full and part time cable households for a portion of
each day through its network of over 100 affiliated television and cable
systems.
Shop at Home's stock (SATH) spend quite a bit of last year around the
$2-$3 dollar range and then jumped to $30+ when news of its internet
strategy spread. As of the writing of this article SATH settled down to
between $12 and $13 a share. The 52-week Range for SATH was 1 7/8 -
30 1/8.
WEB site: www.ishopathome.com http://www.ishopathome.com/toc.html
The Future of TV Home Shopping
TV Home shopping is quickly moving towards full interactivity.
Soon, viewers will move a cursor across their television screen and
access more information as well as instant ordering. Digital TV
will permit mass access and convergence with the internet. Since it is
known that the internet takes away from TV viewing, this combination of
media may be the saviour for traditional broadcasting.
There will be many more channels available at less cost. Web sites
will offer inexpensive full screen, frame accurate video streaming.
Niche channels with high levels of marketing feedback and
consumer database management will make direct selling and marketing/advertising much more cost effective and efficient.
Home shopping will continue to expand for several reasons. The
worlds middle class population is growing fast despite occasional
economic setbacks, use and access prices will drop for internet and
digital TV services and in some cases the free model may take
over, new methods and technologies are constantly being
developed, and the worlds traditional retail infrastructures is struggles to
catch up. One big winner will be those companies that make
a mark in this sector and those companies that deliver telecom and
delivery services to it.
TV home shop companies recognise the threat of the interactive
multi-media revolution and are well placed to take advantage of this new
form of retail. Those who do not embrace the internet or interactivity risk
not just market share but their very existence.
Billions are being invested to reach this goal and as in the past,
there will be many losers and a few winners. But we may also see the
beginning of a new form of competitive market that works transparently
across borders, time zones, economies and cultures. This new interactive
medium may provide a level playing field for everyone, but it will not be
an easy game to play.
Que. Barry Diller who startled the world with the announcement in
early February that his USA networks Inc. was to buy internet
search engine/portal Lycos Inc. in order to form an electronic
commerce powerhouse with a combined revenue of $1.5b. The
idea is to merge HSN, HSN's internet companies Internet Shopping
Network and First Auction units with another USA Networks property
Ticketmaster. The three units have a combined market capitalisation of
about $20b.
The deal offers enormous potential for cross promotion between
USA networks and the Internet properties with a reach of some 70m US
households. HSN and Ticketmaster handle over 1m telephone calls a and
ship 200,000 items out daily. The only question let is if the Internet fund
CMGI Inc. will continue to support the deal in light that Lycos stock took
a downturn once the news was announced.
The USA Networks/Lycos deal is a clear indication of a trend as
the role of partnerships becomes a popular strategy in order to
facilitate quick entry to ecommerce.
Bid.com, a U.S. based on-line auction site and American Interactive
Media (AIM) have combined to offer the next generation of television
shopping. Bid.com is licensing it's on-line auction technology to AIM,
which will launch a customised and branded version of the declining
prices auction system. AIM intends to exploit the technology and
opportunity offered by broadband, set-top boxes, WebTV, network
television and narrowband communications.
BIDtv is similar to home shopping network except that viewers bid
for items when prompted by the live auctioneer using either a touch-tone
phone or a cable television remote device. On-screen displays reveal the
Current Bid, the number of Active Bidders and the number of sideliners
(inactive but potential bidders). The name of winning bidders is
optionally displayed on screen once the bidding is complete. Unlike
merchandise sold on other home shopping shows, prices begin lower and
are bid higher by the competing audience.
The company intends to build pod of 10 digital networks to be
launched on the internet with plans of migrating to all digital platforms.
(Source: Screen Digest Feb 1999)
QVC began its first interactive services three years ago through the
Microsoft Network. iQVC, QVC's internet site achieved sales of some
$50m in 1998. iQVC is the most successful internet general
merchandiser and recently expanded with a site for Canada and QVC UK.
1999 will see further growth as iQVC adds sites for QVC Deutchland and
QVC Japan.
British Interactive Broadcasting (BIB), the digital satellite TV
service, OnDigital, the digital terrestrial service and soon to launch digital
cable systems will all offer interactive capabilities by the end of 1999.
ONDigital has Shop! a partnership between Britain's 2nd biggest
broadcaster Granada Media Group and Littlewood's Home Shopping the
UK's number two mail order catalogue company with over £3b in annual
sales. Littlewood's has already signed a deal with Arcadia, the Burton
menswear and Top Shop group retailer and is planning to launch a
banking operation that will be promoted in a financial show.
BIB has accumulated an impressive list of UK retailers including
QVC and is in discussions with the major supermarket groups Asda,
Safeway, Sainsbury and Tesco. about launching home-shopping channels
for each. BIB has been in negotiations with 100+ major brand leaders
across the retail, banking, entertainment, travel and education industries
Kagan's senior VP/analyst Larry Gerbrant reported that
commission revenues of 5%, that cable operators obtain on home
shopping sales are predicted at $235 mil by 2006. Each of the 100 mil US
TV households creates around $10,000 in media equity or about $1
trillion.
In 1997, Dresdner Kleinwort Benson estimated the UK TV home
shopping market will grow to about one billion pounds ($1.64b USD) by
2003. This was before ONDigitals Shop! was announced and generally,
when there are two or more competitors in the market we can expect to
see an acceleration of growth within the industry.
The prospects for TV home shopping, in whatever form they
evolve into, and in any location in the world are very positive indeed.
being able to reach into every corner to even a niche group of consumers
on a global basis will become a substantial part of the overall retail
market. The only question that remains is not if, but when.
-end-