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How a little known brand at HSN is opening stores when others are closing them

 
Judy Schmeling has served as president of the HSN subsidiary Cornerstone Brands Inc. since August 2016 and chief operating officer of HSN since May 2013. [Courtesy of HSN]
Judy Schmeling has served as president of the HSN subsidiary Cornerstone Brands Inc. since August 2016 and chief operating officer of HSN since May 2013. [Courtesy of HSN]
Published July 7, 2017

ST. PETERSBURG — HSN Inc., formerly the Home Shopping Network, is known for its long history of hawking goods on TV and more recently, online.

But part of its business model includes overseeing several in-house home decor and clothing brands, which are sold exclusively in their own catalogs, on their own websites, and not necessarily live on HSN programming. While HSN has sold off some of these brand names in recent years to off set poor quarterly performance results, the Cornerstone Brands subsidiary of its business is expanding, not shrinking, says president, Judy Schmeling.

But the future of HSN's Cornerstone Brands seems murky.

Liberty Interactive Corp., the Englewood, Colo.-based parent company of QVC, announced its $2.1 billion acquisition of HSN Thursday morning. Liberty already owned a 38 percent stake in HSN. QVC executives hinted during an investors call that the rest of the Cornerstone Brands could be sold off in the near future.

PREVIOUS COVERAGE: HSN acquired by rival retail giant QVC for $2.1 billion

Schmeling is the president of HSNi's Cornerstone Brands and is the chief operating officer of parent company HSNi. Like Bill Brand and Ron Little, the president and chief financial officer, respectively of HSNi, Schmeling, 57, is being considered as a potential replacement for Mindy Grossman, who left her post as CEO in May to run Weight Watchers International. Schmeling has been one of the three leaders co-running HSN's office of the chief executive, which has overseen the company since Grossman's departure.

The Tampa Bay Times sat down with Schmeling to talk about HSN and the future of its Cornerstone Brands business.

You have a long history at HSN. How did you get to Cornerstone Brands?

I've been with the company for almost 23 years. I started at HSN when it was a separate publicly traded company, IAC Retailing. When we took the company public in 2008, I took over the chief financial officer role and then became chief operating officer of HSNi in 2013. There was a period there in 2016 when I was doing triple duty during a challenging timeframe, and that's when Rod Little was hired to be the next CFO.

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Why was HSN interested in something like Cornerstone Brands?

The idea was to leverage synergy between HSN and the Cornerstone Brands, to invest back into the business. The original reason was when we were still part of IAC Retailing. HSN wasn't getting where it needed to be in its apparel and home business, so these collections helped start build the business at HSN. In reality, there are some products from these brands that do sell well on HSN but they're run-offs and we don't do that consistently. They are separate businesses in that way, but on the back end, we can scale these businesses under one consolidated HSNi company. We have the consumer insights to share across all the brands and customer experience online. It's beneficial both ways.

We're all about the direct-to-consumer mind set… HSN is a huge, mass market company with viewers from above-average income levels in the $70,000 and up range. Cornerstone is mostly a home business and about 20 percent apparel. We have five brands which are five different e-commerce companies and catalogs. Ballard Designs is a place for a customer to unleash and find her inner decorator, where we specialize in product customization. Frontgate, our largest brand, is where customers can tell their story at home through products that are livable, stylish and cater to a higher income demographic. Garnet Hill is an adult and children's apparel catalog. It started off as an importer of English flannel sheets. It caters to customers who want an elevated design option and natural fibers. Improvements is a sub-brand under Frontgate that offers affordable items for the home that are all about color and joyful living.

There are a lot of options out there for customers when it comes to shopping. How do the Cornerstone Brands stand out?

What makes retailers stand a part is a differentiation of product. How do customers discover you? Like for Ballard Designs, we're really focused on our extensive customization abilities, which is prominently featured in our retail footprints. We have a local store in International Plaza, which we opened in 2007. A few others are in the Jacksonville and Atlanta markets. A year ago we decided to embark on a bigger retail footprint strategy.

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So you're saying Cornerstone Brands is opening stores now, at a time of record brick and mortar closures in the retail industry?

I think at the end of the day, retailers are shedding stores because they're completely over-stored. The vast majority of retail sales are still done in retail stores. We don't have the baggage others do with a bunch of stores including less productive ones. We are selectively going into locations only in A-plus malls, no B or C malls at all. We are considering some lifestyle centers that aren't traditional mall locations too. It's about creating an experience for those customers where we offer a lot of events, pair with restaurants and bars, and tailor each experience to one of brands. It's so highly customizable and we're making sure its 360-degree experience from design consultations that compliment our services over the phone and online. It's a complete offering. We're getting a significant amount of new customers from digital means too. But the retail footprints help bring the brand to life. The flat digital experience is hard to get across.

Tell us more about this physical store expansion.

Based on the success of retail stores at Ballard Designs, we have decided to open our first Frontgate store. We have a few in Atlanta and Charlotte that are more like the outlet store type. But this new flagship Frontgate store will open just outside of Dallas at the new Legacy West shopping center, which is being built from the ground up. It's a large store format with a coffee shop, a wine bar and an even space inside. We're already planned out tastings and seasonal kick off events, and bringing in experts in our trade as well. We're excited to see what this can mean for our more higher-end customers. It will open at the end of this month, but we're having a grand opening in September.

We opened a Garnet Hill retail store in Bridgehampton, N.Y. It's open for part of the year, not year round, and it has a showroom and event space for artists. We wanted to give customers a place to touch and feel the product. We also did a container pop up store in New Hampshire and Seaport, N.Y., which was a great way to engage. We're trying to think more outside the box with these ideas.

All of this is about reaching our customer. Where is our customer? Whether she's online, on the phone or in the store, it comes back to excellent customer experience. To grow our business, we must keep that in mind because it definitely is a challenging time in retail.

Contact Justine Griffin at jgriffin@tampabay.com or (727) 893-8467. Follow @SunBizGriffin.