July 19, 2007
HSN Tries to Buck Low Ratings
By Tom Ryan
HSN (Home Shopping Network) is celebrating its 30th year as the originator of the television shopping concept, but seems stuck in a mid-life crisis.
Fifteen months after its parent, IAC/InterActive Corp., hired Nike executive Mindy Grossman to reverse its sales slump, HSN is still experiencing flat sales and high merchandise return rates. During the first quarter, sales dropped 1 percent and operating profits fell 12 percent.
To revive sales, an array of new brands have been launched over the last two years, including products by Sephora (beauty), SCOOP NYC (fashion), and Chef Todd English (cookware and tabletop); and more products are being sold at prices below $50. That strategy has worked for QVC, which had an average price of $46.04 last year versus HSN’s $59.49, and has consistently outperformed HSN.
But at the heart of the plan is a complete revamp of the look of the show, including new sets, more engaging camera angles, new graphics color-coded to what’s showing and softer lighting. Cameras focus in closer on expert guests and hosts, who have also been trained to list and explain product features that customers want or think will solve their problems.
“It’s quite subtle. But we’re trying to make the customer feel comfortable, like we’re a good friend talking to them,” Andy Sheldon, senior vice president of broadcast at HSN told the St. Petersburg Times.
It’s all part of Ms. Grossman’s shift to more aspirational merchandise and presentation, although not upscale.
“Aspirational doesn’t mean expensive,” she said. “It’s a quality product that fits their lifestyle. It could be an $800 handbag or an $80 handbag. What matters is we are a place the customer thinks understands them and feels like them.”
To herald the changes, HSN’s first national network TV campaign in five years touting its anniversary was just launched.
But HSN’s sorry performance provoked a Wall Street Journal article last week calling on IAC/Interactive to sell HSN to focus on healthier e-commerce properties. Only last year, in hiring Ms. Grossman, Interactive CEO Barry Diller insisted HSN was critical to capturing the cyber shopper of tomorrow.
“As broadband continues to expand, TV shopping services like HSN will be transformed so people make far more purchasing decisions in the home,’ said Mr. Diller, according to the St. Petersburg Times. “We are only a few years away from having multiple screens linked to the internet in the home that will offer all sorts of services. Long term, HSN’s understanding of retailing by the minute, 24 hours a day, is a very good discipline for the future of commerce.’
Discussion Question: What do you think the retail industry has learned about what works and what doesn’t in television shopping? Should Barry Diller be less bullish about the future of television shopping? What do you think of HSN’s push to reach more aspirational consumers?
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The future for HSN is online, as it is for QVC. QVC recently passed the $1 billion mark in online volume.
Television shopping is going to follow the direct mail catalog business. Catalogs are now moving primarily as a mechanism to drive traffic to conversion via the website. Catalogs are seen as the best advertising medium available, and the website as the best conversion medium available.
Absolutely, HSN needs to move to different video content model. Hard sell infomercial models are being supplanted by empowerment programming. Consumers need, want, and will look for programming which educates in a direct need-benefit manner. Hard sell is out, empowerment is in. Make the right decision, not just record a sale. This type of programming requires a different mindset than the existing scripting produces at HSN.
From a retail perspective, online video drives sales. Various public releases quote anywhere from a 300% to a 600% increase in volume for video promoted items online. The inventory risk is minimal. Placing the products online, in a venue available on demand, as desired, and utilizing the right technology will completely reinvigorate HSN.
Here’s the prescription: empowerment programming, online access, and improved experiential shopping from the site.
Television shopping is a very mature business model that will rapidly move into decline as the internet becomes more and more interactive. Television shopping was a great model before the internet as it allowed the person sitting at home to be an engaged shopper. The question you have to ask is why can’t the television shopping environment be delivered using a YouTube.com type of platform? In this format, the consumer would be able to move faster through the experience and only be involved in those categories they want to be involved with. One of the key reasons for the high rate of product return is the over-hype that occurs and the natural ability for it to draw in customers who make incremental purchases only to realize later that it was not prudent.
Just a quick observation that HSN seems to be taking a new brand-positioning tack in its TV spots: Very Target-like. Can it live up to the promise when you watch its programming or shop its website? That’s another story, yet to be determined.
This seems to be an instance of complacency. The HSN has not evolved with the demographics. They are still targeting an aging demographic and for them to succeed they must pull in the younger groups that are driven to the internet. They must re-invent their marketing streams and their diverse product lines to be attractive to more. Don’t fight the internet, join them by integrating the two.
HSN and QVC will sell more and more when they create YouTube-like videos for every single item on their web sites. As TV channels, each company is terribly restricted because only 1 major item can be demonstrated at one time. If the viewer isn’t interested in jewelry for the next 30 minutes, her interest can’t be sustained. If the internet sites were truly robust multichannel, with simultaneous shows going at one time, as well as archived demos for every product with no exception, selling opportunities would be multiplied. Furthermore, QVC and HSN could open eCommerce stores in other names, based on niche branding and demographics. Right now, the companies are broadcasting on TV, so they’re looking for a very broad audience. On the internet, they could have separate stores for hunters, sportsmen and fisherman, or people just interested in gardening or home improvement or auto accessorizing, or diabetic needs or church outfits for Sundays. The stores don’t even need to be called QVC or HSN.
Mark brings up one of the most significant factors for HSN: it is a low-interaction push format, completely the opposite of retail stores and Internet shopping. There obviously is a certain audience for this, but my suspicion is that it is not a large audience and that it will not grow much because low-interaction push formats meet so many fewer consumer expectations. This probably means that HSN’s potential, basically, is QVC’s audience, and that’s about it. An obvious way to draw this audience is to give them an experience that meets more of the audience’s core purchase expectations, which means higher interactivity, shorter category time segments, broader choice, more goods aimed at the more interactive (younger) set, etc.–in other words, more like in-person retail and Internet. As we can see here, the pressure is, from all angles, to be more like in-person retail and Internet.
HSN has the key to their problem in their hands. Why is the customer return rate so high? The return rate is high because the HSN “Pitchmen” over promise and under deliver. Especially with gemstones…you never get what you are shown. With consumer products and electronics they avoid comparisons with products readily available in the marketplace by putting together “bundles” designed to present far more value than is being delivered. When consumers actually get product and are able to take a hard look at it they realize they have received no bargain and return the purchase or decide not to buy from HSN again.
In short, ratings are down because audiences have lost confidence and wandered. HSN would seem to be so locked into pseudo celebrities selling unknown brands or no brand product that they can’t pull out of a much deserved tail spin. The order here is change or perish!
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The future for HSN is online, as it is for QVC. QVC recently passed the $1 billion mark in online volume.
Television shopping is going to follow the direct mail catalog business. Catalogs are now moving primarily as a mechanism to drive traffic to conversion via the website. Catalogs are seen as the best advertising medium available, and the website as the best conversion medium available.
Absolutely, HSN needs to move to different video content model. Hard sell infomercial models are being supplanted by empowerment programming. Consumers need, want, and will look for programming which educates in a direct need-benefit manner. Hard sell is out, empowerment is in. Make the right decision, not just record a sale. This type of programming requires a different mindset than the existing scripting produces at HSN.
From a retail perspective, online video drives sales. Various public releases quote anywhere from a 300% to a 600% increase in volume for video promoted items online. The inventory risk is minimal. Placing the products online, in a venue available on demand, as desired, and utilizing the right technology will completely reinvigorate HSN.
Here’s the prescription: empowerment programming, online access, and improved experiential shopping from the site.
Television shopping is a very mature business model that will rapidly move into decline as the internet becomes more and more interactive. Television shopping was a great model before the internet as it allowed the person sitting at home to be an engaged shopper. The question you have to ask is why can’t the television shopping environment be delivered using a YouTube.com type of platform? In this format, the consumer would be able to move faster through the experience and only be involved in those categories they want to be involved with. One of the key reasons for the high rate of product return is the over-hype that occurs and the natural ability for it to draw in customers who make incremental purchases only to realize later that it was not prudent.
Just a quick observation that HSN seems to be taking a new brand-positioning tack in its TV spots: Very Target-like. Can it live up to the promise when you watch its programming or shop its website? That’s another story, yet to be determined.
This seems to be an instance of complacency. The HSN has not evolved with the demographics. They are still targeting an aging demographic and for them to succeed they must pull in the younger groups that are driven to the internet. They must re-invent their marketing streams and their diverse product lines to be attractive to more. Don’t fight the internet, join them by integrating the two.
HSN and QVC will sell more and more when they create YouTube-like videos for every single item on their web sites. As TV channels, each company is terribly restricted because only 1 major item can be demonstrated at one time. If the viewer isn’t interested in jewelry for the next 30 minutes, her interest can’t be sustained. If the internet sites were truly robust multichannel, with simultaneous shows going at one time, as well as archived demos for every product with no exception, selling opportunities would be multiplied. Furthermore, QVC and HSN could open eCommerce stores in other names, based on niche branding and demographics. Right now, the companies are broadcasting on TV, so they’re looking for a very broad audience. On the internet, they could have separate stores for hunters, sportsmen and fisherman, or people just interested in gardening or home improvement or auto accessorizing, or diabetic needs or church outfits for Sundays. The stores don’t even need to be called QVC or HSN.
Mark brings up one of the most significant factors for HSN: it is a low-interaction push format, completely the opposite of retail stores and Internet shopping. There obviously is a certain audience for this, but my suspicion is that it is not a large audience and that it will not grow much because low-interaction push formats meet so many fewer consumer expectations. This probably means that HSN’s potential, basically, is QVC’s audience, and that’s about it. An obvious way to draw this audience is to give them an experience that meets more of the audience’s core purchase expectations, which means higher interactivity, shorter category time segments, broader choice, more goods aimed at the more interactive (younger) set, etc.–in other words, more like in-person retail and Internet. As we can see here, the pressure is, from all angles, to be more like in-person retail and Internet.
HSN has the key to their problem in their hands. Why is the customer return rate so high? The return rate is high because the HSN “Pitchmen” over promise and under deliver. Especially with gemstones…you never get what you are shown. With consumer products and electronics they avoid comparisons with products readily available in the marketplace by putting together “bundles” designed to present far more value than is being delivered. When consumers actually get product and are able to take a hard look at it they realize they have received no bargain and return the purchase or decide not to buy from HSN again.
In short, ratings are down because audiences have lost confidence and wandered. HSN would seem to be so locked into pseudo celebrities selling unknown brands or no brand product that they can’t pull out of a much deserved tail spin. The order here is change or perish!