Five Ways the QVC and HSN Merger Will Disrupt the Retail Landscape
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By Pam Danziger
We all remember the 2000 hit movie “The Perfect Storm” starring George Clooney, Mark Wahlberg and Diane Lane about the ill-fated Andrea Gail fishing boat battling the confluence of three massive storms in the Atlantic Ocean. I can think of no better analogy to what the retail industry is facing now that QVC is merging with HSN under Liberty Interactive Corporation.
The combined QVC/HSN companies suddenly emerge as a major retail competitive threat ready to do battle with Amazon and Walmart/Jet in the next retail frontier: Virtual Retail. The battleground is in the mind of the shopper for his or her attention and is no longer bound by a physical location.
Competing in that virtual retail world, QVC/HSN have a critical competitive advantage. They don’t just offer easy, direct access to products. They’ve mastered entertaining customers at the same time. That should get the attention of not just Amazon and Walmart but retailers everywhere.
Television shopping combines unique proprietary products with entertainment, in a powerful, imaginative, attention-getting way that no other large-scale retail model has matched.
Today success in retail is less about what you sell, and more about how you sell it. And television shopping combines the what, often unique proprietary products, with the how, entertainment, in a powerful, imaginative, attention-getting way that no other large-scale retail model has matched.
“This merger is a total win/win for QVC and HSN and a deal that was 25 years in the making,” says Mark Bozek, currently founder and CEO of NYC-based Galgos Entertainment, but who started in television shopping back in 1992 as EVP at QVC under Barry Diller, then moved with him to HSN as CEO, then on to found EVINE.com and eventually becoming CEO at EVINE Live, the third major player in television shopping. “It has stepped them up a level as players in digital commerce, or more appropriately the Commerce space, with a capital C, in a big way.”
Bozek wrote eloquently, and pointedly, about the challenges of competing with Amazon, and now by extension with Walmart/Jet.com, in The Robin Report,“Amazon Ain’t Just a River in Egypt.
” To his mind, QVC/HSN have the right stuff to do just that. “The opportunities are vast and truly disruptive, not the throw away disruptive term that everybody talks about. But truly disruptive.”
Of course, the prospects for QVC/HSN to reshape the retail landscape in a truly disruptive way remains only potential. But it has the critical pieces of the puzzle in place. Success in virtual retail requires a powerful triple play: fun and entertainment, being great merchants, and personal connection. Plus QVC/HSN have two unique power plays to capture the imagination and attention of the shopper: discovery and impulse.
No other retailer on the planet, including Amazon, Walmart or anybody else, puts all these critical pieces together in such an imaginative way in order to deliver value to the customer. Let’s break these components of success in the new virtual retail world down:
Shopping must be fun and entertaining
With the consumers’ paradigm shifting turn from things to experiences, never has it been more important to infuse fun and entertainment into the retail environment. “For many years people scoffed at the idea that shopping on television was entertainment, but it is a big mistake not to recognize how much entertainment played into its success,” Bozek says.
“I am big believer in Angela Ahrendt’s strategy at Apple that retail has to be 80% experience and 20% shopping. That to me is the best strategy on the planet right now. The brick-and-mortar retailers need to really think about what this means for their businesses,” Bozek advises.
Too many retailers have simply not fully embraced the experiences side of retail, wrongly thinking that all they need to do is add a coffee shop or restaurant to the store and voila, their store becomes an “experience” for the shopper. “In the name of experiences, a retailer puts a restaurant on the fifth floor of the building. But the customer has to walk through four floors of stuff to get to the restaurant. If those floors aren’t exciting, what’s going to make the customer keep going up to have a $25 hamburger?” he asks.
Another factor that makes television shopping uniquely entertaining and engaging with the customer is its interactive nature. “It is one thing to watch television and enjoy George Stephanopoulos or Matt Lauer. That is a passive form of watching. If you are going to watch and spend money with a television shopping channel, that is a much deeper, interactive relationship,” Bozek explains.
Great merchants, great merchandise
The fun of shopping is often, though not always, fulfilled by product. And that means being a merchant with a special talent to see the potential in a product to satisfy consumers’ needs, combined with the skill of presenting that product in such a way as to build desire. That’s too frequently missing on the venture-backed e-commerce world. “They position themselves as technology companies and have forgotten to be merchants,” Bozek says. “A lot of things have evolved in retail, but the basics of merchandising have been around for 100 years and it hinges on offering unique product the customer can’t buy anywhere else.”
Today Bozek is highly engaged in the digital-side of commerce, but he is first and foremost a good merchant. He was introduced to Joy Mangano selling mops on QVC and knew she had the special magic of entertaining, desire-building presentation backed up with unique products that meet consumer needs. When he left for HSN, he couldn’t bring her along. So instead he decided to buy Mangano’s company, a $10 million investment that has grown into a $100 million business selling some of the most successful products in HSN history. Plus he gets bragging rights that Bradley Cooper played him in the 2015 movie, Joy, starring Jennifer Lawrence as Joy Mangano.
Forging a personal connection between the retail merchant and the customers is the final leg of the virtual-retail triple play. Through the mass medium of television, the home shopping channels have been able to build real community between the viewer/customers, the QVC/HSN program hosts and the product spokesperson. “TV shopping has a ridiculous amount of loyalty to the network, but more so to the brand personality and the host,” Bozek explains. “The customers know as much about the hosts as they do their own children. Where do you get that in any other retail environment? Amazon can’t do it.”
The loyalty customers feel for the network, the product spokespeople and show hosts translates into the ability to move product in unfathomable quantities in just a few minutes. The “dollars per minute” business model also is more profitable since QVC/HSN can go deep, rather than broad as Amazon and Walmart must. A small investment on the part of QVC or HSN for an hour-long show made up of 6-8 minutes per product provides real-time market research, not just on the product, but the ability of the presenter to make that essential personal connection with the audience. Joy Mangano’s success is perfect testament to that.
The element of discovery is another key competitive advantage that QVC/HSN have, that combined with the virtual retail triple-play makes them a formidable challenger to Amazon and Walmart/Jet. Most of the truly break-away television products have come through the same discovery process: a fledgling entrepreneur with a solution to an existing customer need presented in an entertaining and personally connecting way. Be it Bare Minerals or IT Cosmetics on QVC or Wolfgang Puck Cookware, Adrian Arpel’s Signature Club A, or Andrew Lessman Vitamins on HSN, the shopping channels were the original “Shark Tank.”
To Bozek’s dismay both QVC and HSN have become so big that “the original idea of discovery has been lost somewhat.” But perhaps with the huge operational efficiencies that will be realized in this merger, more can be invested to discover the next big thing. “There is an enormous opportunity to reinvent that and create the next form of discovery,” Bozek believes.
And finally, the value of impulse shopping that the television shopping experience compels cannot be underestimated. Much of Amazon’s and Walmart/Jet’s business model is based upon the customer knowing what they want and conducting a search to find it. But who knew they needed a Joy Mangano Self-Wringing Mop until they saw her on tv at midnight demonstrating it?
“It is based on the idea the customer has to get it right now because you can’t buy it anywhere else and if you don’t buy it now, it is going to disappear,” Bozek says. “I think the notion of live is really key. That is why I put the word Live in Evine. It wasn’t just because it was live TV, but it was live impulsive interaction.” It means real-time interaction, real-time desire and real-time impulse shopping any time of the day or night.
These unique qualities that QVC/HSN have developed – entertainment shopping, unique merchandise, personal connection, discovery and impulse – move the combined company from being small insignificant retailers shilling stuff on late night tv to lonely insomniacs living in trailer parks to real players for the next retail revolution: Virtual Retail. Now QVC/HSN can go up against two of the world’s biggest retailers, Amazon and Whole Foods and Walmart and Jet.com, in a serious way. It’s retail disruption on steroids. It’s a Perfect Storm.
More about Pam Danziger: Pamela N. Danziger is an internationally recognized expert specializing in consumer insights for marketers targeting the affluent consumer segment. She is president of Unity Marketing, a boutique marketing consulting firm she founded in 1992.
As founder of Unity Marketing, Pam leads with research to provide brands with actionable insights into the minds of their most profitable customers. She is the author of five books including a recent mini-book, What Do HENRY’s Want?, explores the changing face of America’s consumer marketplace. Pam is frequently called on to share new insights with audiences and business leaders all over the world. Contact her at firstname.lastname@example.org.
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