Sunday, January 21, 2018
Business

HSN and QVC struggle to find their place in a world with less TV

St. Petersburg-based HSN built its success on a loyal fan base of female shoppers who historically made all family shopping decisions, at a time when Amazon was just a place to buy books. Hawking goods on TV was HSN's niche.

But times have changed, and the former Home Shopping Network desperately needs a new niche.

Television, in a sense, has become outdated because of services like Netflix and on-demand programming, said Steve Kirn, executive director of the David F. Miller Retailing Education and Research Center at the University of Florida.

"If you need a thing, you don't turn on your television," Kirn said. "You go online or to a store. Period."

HSN reported a 4 percent decline in net sales and a 36 percent drop in profit for the second quarter, following a trend of slipping sales and declining profits that has snowballed all year.

In an effort to turn things around, HSN CEO Mindy Grossman said last week that the company will sell off two of its apparel lines: TravelSmith and Chasing Fireflies. The larger strategy will be to try to sell more merchandise that consumers can't find anywhere else through new programming, adding more exclusive partnerships and continuing to find its place online, while going up against seasoned e-commerce giants like Amazon.

"I would say that what's happening right now in terms of the uncertainty, the distraction, the negativity, that's an anathema to the consumer mind-set and for retail in general, especially the want side of retail versus the need," Grossman said to analysts last week about the company's poor performance.

"They will wait for what they want versus need. We really have to focus on the experience, on the uniqueness and really delivering compelling content wherever the consumers are to drive that commerce."

To that end, HSN has partnered with celebrities to promote its exclusive brands, like Serena Williams' and Giuliana Rancic's clothing lines. Some of these partnerships have led to successful digital experimentation for the company. During Serena Williams' New York Fashion Week show last year, shoppers were able to watch a live stream of the show on HSN.com and Vogue.com and were able to purchase items from the show directly on HSN.com.

"This provided us the opportunity to reach millions of potential customers who may not have considered HSN in the past," said Brad Bohnert, spokesman for HSN.

But HSN's tradition of attracting celebrities is more challenging today because certain celebrity names generate interest from segmented audiences, said Britt Beemer, chairman and CEO of America's Research Group, a retail consulting firm. His point: Personalities like talk show host Wendy Williams and chef Donatella Arpaia don't draw a millennial audience.

And you don't see Justin Bieber or Drake making appearances on HSN.

"When you think of online shopping, HSN isn't even in the top 20 that comes to mind," Beemer said. "How do you cut through the clutter now, when so many new websites are popping up every day that appeal to those consumers that are in their 20s? They don't have time to sit and watch TV that long."

Even with exclusive brands and products on sites like HSN.com or QVC.com, Amazon will be hard to compete with.

Amazon success has scared some of the biggest retailers in the world. Walmart bought Jet.com, another e-commerce website, for $3 billion this month so the two companies can combine efforts in building a more competitive online retail platform against Amazon.

"If HSN is going to survive, they're going to have to find a way," Beemer said.

HSN isn't the only one struggling. Its main competitor, QVC, suffered a second-quarter slump from a sudden drop in women's apparel sales, which contributed to QVC shares falling 21 percent — reaching a three-year low for the online and TV retailer.

"I'm not saying HSN is down for the count, but it's all about being relevant right now," said Faith Hope Consolo, chairman of the Retail Group for Douglas Elliman Real Estate in New York City. "You have to be able to change with how consumers shop. It's all about the experience right now, which I don't think most people are getting from TV."

Companies like HSN and QVC have been expanding online in an attempt to reach new customers they don't reach on TV. Grossman said during an earnings call this month that HSN's digital efforts now make up 54 percent of its business. Mobile sales grew 16 percent in the second quarter, "reflecting 21 percent of our total business and 40 percent of digital sales."

QVC's online sales counted for 45 percent of the company's total revenue in the second quarter, growing 11 percent over a year earlier. Nearly 60 percent of all online sales came from a mobile device.

But HSN and QVC might be a little late to the game, Consolo said.

"How is the audience different when you can get anything on Amazon?" she said. "Amazon is just so proactive. You can get delivery any time and have it right away. They're channeling that instant gratification."

Contact Justine Griffin at [email protected] or (727) 893-8467. Follow @SunBizGriffin.

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