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Changing Times Dont Scare Shoppers

11/26/2000 7:00 PM Eastern

For home-shopping networks, the all-lucrative fourth quarter is holiday heaven.

It is the time of year when executives give thanks for frantic home shoppers, generous sales spikes and limitless promotional and branding opportunities. At night, a cornucopia of merchandising opportunities-not to mention visions of golden revenues and year-end bonuses-dance in their dreams.

But a couple of Grinches could disrupt home shopping's holiday. Electronic retailers desperately want a piece of this year's lucrative retail action. And lurking nearby are developers of digital interactive TV, eager to stuff interactive home shopping into each and every TV network's stocking.

How high are the stakes? Once networks and cable and satellite operators agree on standards for metadata-information about programs and commercials embedded in video streams-home shopping could generate as much as $23 billion in commerce by 2005, according to Forrester Research. That's up from $5 billion now.

Currently, the nation's top MSOs are hitting about a 15 percent digital penetration rate-growing, but still small. The cable industry added 700,000 digital subscribers in the third quarter to end the period with 7.8 million, according to the National Cable Television Association.

But with interactivity, home-shopping networks will be challenged to hold their market position, analysts say.

"Yesterday's home-shopping customers were thrilled with being able to simply stumble across something interesting on TV and buy it," telecommunications analyst Jeff Kagan said. "Tomorrow, they will want to search for items and buy on-demand instead of waiting for the item to appear on the networks' programming schedule.

"If home shopping can make that interactive, on-demand, always-on transformation, they can thrive. But that's the challenge and the opportunity."

The top home-shopping networks-QVC, HSN, ValueVision and Shop At Home-are enhancing their back-end infrastructures, strategizing their positions on the Internet and seeking innovative television-commerce partnerships.

"We're in e-tailing and we're interactive in our partnership with Excite@Home [Corp.]," said Jack Kirby, president of HSN Interactive. "We're already engaging in all three businesses."

With co-branded Web sites in place, home-shopping networks are heavily cross-promoting their Web and TV offerings. QVC, for example, has an integration policy that ensures each day's TV events are featured on the Web, while the network is certain to promote the company's Web site, iQVC.

"The businesses aren't that distinct," said Doug Rose, QVC Inc.'s vice president of merchandising and brand development, in reference to the TV and Web outlets. "They are both outlets to reach QVC and shop QVC."

While iQVC is considered a robust business-and about 43 percent of its revenues are generated in the fourth quarter-it is still considered incremental to the core TV- network business.

"Both are doing extremely well," said iQVC vice president of operations, Steve Hamlin. "But we're still a small little dot to the network."

iQVC generates about $200 million annually.

Still, synergy is key to a shopping network and to building out its brand on the Web, said Dick Barnes, chief financial officer of ValueVision International Inc. ValueVision heavily cross-promotes its site (
vvtv.com

), which simulcasts streaming video with the network and features Internet-only Webcasts. Co-branding and cross-promotion are a vital part of the mix, but thanks to its parent network, VVTV also gets an edge when it comes to customer service and fulfillment expertise.

Home-shopping network executives are quick to point out that many e-tailers are still suffering fulfillment and shipping hangovers from last year's holiday-shopping party. Recent studies support that view, indicating that fulfillment problems in 1999 have made many consumers wary of using the Web for holiday shopping this year.

The networks say they don't share that problem.

"We had a 99 percent on-time delivery record last year," said Jack Kirby, president of HSNi, Home Shopping Network's interactive division.

Tim Engle, COO of Shop At Home Inc. and its Internet site, Collectibles.com, said networks also profit from viewer loyalty and consistent exposure to new audiences.

Unlike QVC and ValueVision, which are backed by the respective muscle of Comcast Corp. and NBC, Shop At Home is largely dependent on its stable of six UHF stations, other broadcasters and EchoStar Communications Corp. for distribution.

"I'm sure anyone in my business is a competitor, but I don't view it that way," he said. "I've got my niche. I've got access to 60 million homes, 24 million full-time. What do the other dot-coms have?"

As for potential cannibalization by television commerce, home-shopping network executives are more circumspect.

"We're keeping abreast of interactivity," said ValueVision's Barnes, who added that the network has talked with cable operators and other interactive suppliers about potential interactive tests.

Shop At Home has a deal with interactive application provider OpenTV to test enhanced home-shopping applications. "Our primary focus is on our core business, including our Internet site, but we'll continue to look at the interactive TV space as it develops," said Engle.

HSN's Kirby said his company is closely watching its partnership with Excite@Home, which launched in September. Airing three times a week, the partnership features a one-hour co-branded show on HSN and a second hour that is exclusively Webcast by the data-over-cable provider. The partners offer Internet chats and special merchandise opportunities exclusive to Excite.

QVC is keeping a close eye on t-commerce opportunities and has forged a deal with America Online Inc.'s AOL TV.

"If you really look at t-commerce, it comes down to selling by video," said iQVC's Hamlin. "Are we scared? No. That's where we belong.

 

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