ShopNBC Revamp Targets Rivals

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ShopNBC, No. 3 after QVC and Home Shopping Network, is undergoing its first rebranding in the three years since it dropped the ValueVision brand name.


The transactional television network's revamping began last month. At one-fifth the sales of home shopping leader QVC, ShopNBC sees room for growth.


"We wanted to emphasize the product and to make sure all of the communication around the product was executed with economy," said Will Lansing, president/CEO of ValueVision Media Inc., the Eden Prairie, MN, parent of ShopNBC. GE Equity and NBC own 40 percent of ValueVision Media.


The makeover gave the channel a cleaner look. Screen graphics are easier to read, and the music and aural cues are improved. Product details are communicated more efficiently. More of the screen is dedicated to the product being sold, and the overall look and feel is more upscale in keeping with ShopNBC's brand positioning against QVC and HSN.


Take the channel's "Our Top Value" feature. With the new merchandising effort, there is now higher airtime productivity than with the products it displaces. The deals of the day run six to eight times for 15- to 30-minute intervals, depending on the product. Items designated as exceptional value are available for 24 hours or until sold out.


ValueVision Media's stock is up roughly one-fifth since the Aug. 16 relaunch.


Lansing, formerly chairman of Federated Direct and president/CEO of Fingerhut Cos., is increasing marketing from $1 million in the last fiscal year to nearly $10 million this year. Billing inserts, direct mail, e-mail, online keywords and on-air promotions will be used. All marketing for customer acquisition and retention is created and handled in-house.


"We're spending a lot of energy on attracting new customers and reactivating old customers," he said.


Its Web site, www.shopnbc.com, complements the channel. Last year, ValueVision posted sales of $617 million and a loss of nearly $11 million. Its ShopNBC.com unit accounted for $111 million in sales.


ShopNBC eyes a larger share of the $7 billion home shopping industry, which is growing annually at a double-digit rate. ShopNBC last year recorded $11 in average sales per home, HSN $22 and QVC $45. It penetrated 1.5 percent of the 60 million cable and satellite homes it is distributed in nationwide. Figures for HSN and QVC are 4 percent and 8 percent, respectively, of their distribution.


ShopNBC's $213 average selling price per item in 2003 is much higher than HSN's $47 and QVC's $42. By year-end 2007, its average price point is expected to fall to $133.


Sixty-six percent of ShopNBC sales come from jewelry versus 23 percent for HSN and 30 percent for QVC. Jewelry is the largest selling merchandise category for ShopNBC and QVC. For HSN, 41 percent of sales are from home and housewares.


ShopNBC's picture for the second quarter places jewelry's share at 67 percent, down from 71 percent in the same timeframe in 2003. The share of computers and electronic items remains at 15 percent. Apparel accounted for 3 percent versus zero in the year-ago period. Corresponding numbers for cosmetics are 3 percent versus 2 percent. Fitness and health was stable at 1 percent, as was home at 11 percent.


ShopNBC's average selling price was down 21 percent to $186 in the second quarter from $237 in the same period in 2003.


The number of new customers rose 33 percent to 129,935 in the quarter from 98,001 in the year-ago period. Shipped units grew 36 percent to 1.23 million from 905,000 in the year-ago period.


The company projects revenue this year will rise in the low- to mid-teens by percentage. Unit volumes are expected to grow faster than sales. But gross margins will be lower than the typical 36 percent to 37 percent. The new customer count is expected to grow. Last year, ShopNBC had 800,000 customers. Plans call for 950,000 customers this year.


ShopNBC will set aside more money for production values, presentation and hosts. This will support the new look and feel. IT infrastructure will be upgraded, particularly in call centers, customer support and systems.


Product mix will broaden beyond jewelry, with a sharper focus on home, cosmetics, fitness, apparel, computers and electronics. ShopNBC already beats its rivals in the range of watches it sells.


Pricing strategy will change to reflect most competitively marked items. There will be a greater emphasis on bundled offers that are distinct from those found in mall stores.


ShopNBC also aims to lower product return rates, now in the mid-30 percent range. This, the company claims, will be the result of greater perceived value, lower average selling prices and improved customer satisfaction.


E-commerce is a critical part of ShopNBC's future. The catalog matters as well, but it drops only four times annually and accounts for less than 5 percent of sales. But each channel has its own appeal, as ShopNBC estimates 2004 sales of $700 million.


"TV is a much more dynamic medium than the Internet, so it lends itself to demonstration of the product," Lansing said. "It's also a great vehicle for salesmanship, and the Internet can't even come close. Yet the two are complementary. TV is an item business, and the Internet is more of an assortment business. When we get quantities too small to air, they naturally belong on the Internet."


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