QVC Completes First Year in Germany, Expects to Break Even in 1999

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DUESSELDORF, Germany -- QVC racked up sales of 20 million German


marks ($11.1 million) from 100,000 customers in its first year of operating on the


German market that ended December 1.


In the last three months of the fiscal year the monthly growth rate topped 25


percent and weekly sales were as high as DM 2 million ($1.1 million). The


shopping channel, Francis Edwards, CEO of the German operation, said, could


break even by the end of next year.


If it does, QVC will have matched its German rival, Home Order Television


(H.O.T.), which launched a year earlier and also expects to become profitable in


1999.


Edwards cautioned, however, that his prediction depended on QVC winning


permission to broadcast across all German cable systems, "a freedom we do not


unfortunately have as yet."


For now QVC is anchored in its German "home state," North Rhine Westphalia,


where it has complete access to the state's cable TV system. In addition it has


cable facilities in eight other German states. Four of them are in the old East


Germany.


The German cable networks put QVC in 3.5 million cable households with


another 6.5 million households able to receive QVC broadcasts trough the Astra


1D satellite on Transponder 52.


Edwards expects QVC's German customers to top 400,000 by the end of the


year, noting that the shopping channel had been adding up to 1,500 new


customers a day in recent months. QVC's call center fields 4,000 calls a day and


up to 8,500 on peak days.


So far QVC has invested DM 70 million ($38.8 million) and expects to boost


outlays "over the middle term" to DM 200 million ($110 million). QVC


spokespersons would not specify over how many years the investment will be


made.


But the network clearly expects to reap a handsome profit from Europe's richest


market. Edwards estimated that turnover by the year 2000 should hit DM 500


million ($277.7 million).


Edwards said that Germany's short-term teleshopping market potential was DM


1 billion which should rise to DM 2 billion in short order.


"Germany is a strategically important market for us," Edwards said. "Mail order


as a concept is widely accepted here, as the rapid development of the catalog


business has demonstrated."


Teleshopping, he added, is basically the same thing as catalogs. "The only


difference is that it uses a more modern medium and allows us to present viewers


with far more sweeping information about the products we offer."


He also cited a Forsa Institute survey showing that 77 percent of all Germans


have heard "about this new way of shopping," while 4.5 million have actually


bought goods from the TV and another 5 million expect to try it soon.


QVC is on the air 24 hours a day with 14 hours of live programming and the rest


repeats. It offers viewers 15,700 products with jewelry accounting for 47 percent


of turnover and household goods for another 42 percent.


Most products on the channel are made in Germany but 25 percent come from


other European countries and 9 percent from the US.


QVC managed to launch in Germany in 1996 despite complex legal obstacles


that arose from conflicting laws and the authority of individual states and the


federal government over issuance of TV and other licenses.


However, QVC did follow in the wake of H.O.T. which won a court case


keeping it on the air, followed by a semantic twist in German regulations that


labeled home shopping TV as a "media service" and not a broadcaster.


Most important, however, was QVC's promise to create new jobs -- a promise


that proved catnip to the North Rhine Westphalia government, which, like all of


Germany, suffers from double digit unemployment.


It is a promise QVC has kept. Starting with 190 employees in 1996 it now


employs 410 with 180 engaged in administration, 190 in the channel's call center


in Bochum, a town not far from Duesseldorf, and 40 in distribution. n
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