QVC Looks to Break Even in Germany by 2000

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DUESSELDORF, Germany - QVC Germany got off to a strong start this year and CEO Francis Edwards is "optimistic that we will break even next year. That has been our target from the beginning."


QVC entered the German market in late 1996 despite considerable legal obstacles. It had revenues of 92 million Deutschmarks ($51.1 million) last year. Current projections call for sales of DM 500 million ($277.7 million) in 2000. But Edwards said the operation could break even with sales of DM 400 million.


The shopping network currently reaches 15 million German households on a "full- time equivalent basis, which is how we report results in the US." QVC is seen in 25 million homes, but it only has a 3-hour daily window in many.


"We have a good chance next year of being in 19 million homes [full time]," largely through expanded use of satellite penetration. QVC's satellite reaches 8 million homes on a full-time basis while QVC penetrates 6 million of Germany's 17 million cable households. Between the two delivery system, the maximum potential is 25 to 26 million homes.


QVC is on NBC's European channel from noon to 3 p.m. and is followed by Giga TV, a company based here that targets a younger audience interested in computers and the Internet, Edwards said.


QVC Germany still has unresolved legal problems that arose from Germany's complicated broadcast law and that were managed on an ad hoc basis through use of semantic circumscription that labeled home shopping a "non-broadcast" activity.


Edwards noted that these problems were ebbing because of growing public and political support. The state government of North Rhine Westphalia let QVC set up here on a company pledge to create more than 600 jobs.


"We've created about 700 jobs, of which 620 are direct QVC employees," Edwards said, "and jobs are the reality of the situation. That's why our legal problems are starting to disappear." German unemployment is above 10 percent.


Some 70 percent of items are sourced in Germany, another 20 percent in other European countries and about 10 percent or less in the US. But Edwards emphasized the mix was not very different from the UK or the US.


The main difference between QVC and other home channels is in "our focus and the way we sell. We like show hosts to be like the person next door - low key. We don't do hard selling.


"The other thing we focus on in Germany is the quality of our service because we believe that as a US company we have an advantage over German companies in understanding how to deliver quality service to our customers."


About a year ago the German news magazine Spiegel called Germany a "service desert" except for occasional oases such as Viking Office Products and Lands' End. Things haven't changed much since, and Edwards said that "for us, this is a service opportunity."


The company has a 17,000-square-meter warehouse in Neuss, about 20 minutes outside Duesseldorf where studios and corporate headquarters are located. The call center is in Bochum, up the Ruhr Valley.


"We expect to grow rapidly over the next few years. We're planning a new warehouse, call center and new studio, which we are renting now."


Growth in the UK, where QVC has been active far longer, is also accelerating rapidly. Results announced in London last month showed 1998 net sales were up 45 percent to 146.2 million pounds (roughly $230 million).


UK profits totaled 12.5 million pounds (about $20 million). Company call centers last year received 12.8 million calls and shipped 7.5 million items. First quarter sales this year were equally strong, up 31 percent to 40.3 million pounds.

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