QVC: The unlikely juggernaut of mobile shopping
WEST CHESTER, Pa. - In Control Room A at QVC's 58,000-square-foot studios, line producer Sean Hagan is perched behind five computer screens in a setup that looks more a NASA engineer than retail sales analyst.
Some screens show him what viewers are seeing or will see live on the home-shopping channel; others display constantly updating data: how many items have sold online or over the phone in various sizes, how many remain in stock, how many phone calls have come in the last 10 seconds, and more.
As QVC host Leah Williams and designer Isaac Mizrahi show off a pair of boot-cut stretch pants, Hagan helps shape the segment by talking to Williams through an earpiece.
"Good spike showing those colors," he tells her after they showcase the medium camel and dark navy pants and send the fever line that tracks new phone calls squiggling upward.
Hagan keeps watching the instantly updating charts and tables as Mizrahi describes the fabric ("It holds the thigh without being like sausage casing"), as models vamp in different outfits. But it was the range of color offerings that really seemed to grab shoppers' attention.
"Let's do colors again, please," Hagan says.
And so Williams and Mizrahi once again cycle through the black ("Major," Mizrahi declares); the winter white ("You're not going to see through these"); the crimson ("Almost pumpkin, almost, but not exactly"); and the rest of the options.
The total-phone-activity fever line climbs higher, and nearly all the customer service agents are fielding calls. Before the 13-minute segment is over, more than 2,000 pairs of pants have been sold.
Such scenes occur several times an hour at QVC, with producers studying the numbers and using them to make real-time merchandising decisions. This sort of instant access and attention to customer sentiment has been a staple at QVC since the beginning. Even in the pre-Internet era, employees were watching what made the phone lines light up.
That attention to data may also explain why the 24/7 pageant of panini makers, flameless candles, anti-aging creams and ankle boots has, despite QVC's fusty reputation, quietly outmaneuvered other retailers in remaking itself for the digital era.
QVC has seen online sales soar to 45 percent of its total U.S. sales by trailblazing on one of the most vexing challenges in retail today: getting people to buy, not just browse, on their phones and tablets.
With a strategy centered on "second screening" - the tendency to watch TV while also swiping and tapping on a gadget - QVC has become the fifth-largest mobile commerce retailer in the United States, according to an analysis by the trade publication Internet Retailer. In fact, it is projected to ring up a mobile sales haul this year that is nearly as large as Wal-Mart's.
As shoppers get more hooked on their mobile devices, the entire retail industry is scrambling to find ways to better integrate app usage with more traditional shopping experiences. So QVC's early lead in this format could prove crucial to securing its future. And with the all-important holiday shopping season around the corner, it may be its best bet for luring new customers and turning them into QVC devotees.
QVC says no one just watching TV
The focus on second screening has been central to QVC's online experimentation since its early days.
"We came to appreciate the fact - maybe the obvious fact - that people lead busy lives. They're engaged with multiple devices at one time. No one's just watching TV anymore," QVC chief executive Mike George says.
When the iPad was introduced in 2010, that was a game changer, according to Alex Miller, QVC's senior vice president of digital commerce. "That device, in particular, was a natural place to apply something that was really core to our business model," Miller says.
And that's when QVC doubled down on designing a user experience that was tailored not so much for shopping on the go as for shopping from the couch. Today, when you open the QVC app, you instantly see the item that is on-air at the moment. Just below that, there's a prompt that allows you to quickly find everything that has been on TV in the past several hours.
The shopping channel has also moved to make it especially easy to make a purchase on a small screen. (Many retailers have found that mobile shoppers get turned off by checkout processes that involve too much typing.) If you have a QVC account and an Apple device equipped with Touch ID, you can check out in less than 10 seconds by hitting the "Speed Buy" button and then letting the app scan your fingerprint. To get customers comfortable with the new technology, the network ran segments on-air explaining how to use it.
The app is also QVC's bid to lure cord-cutters, since it includes access to the network's full slate of live programming.
These efforts have helped QVC's mobile sales grow to comprise 40 percent of its e-commerce sales, an unusually big share at a time when many retailers still find shoppers largely engage with them on these devices to scan prices or check store hours.
QVC focuses on customer service
QVC has also moved to rethink its merchandising strategy and amp up its communications with customers.
When you walk through Product Central, the vast headquarters warehouse packed with 300,000 items soon to be featured on air, you can see the wide assortment of items it sells: A roller cart stacked with electric chain saws is wedged between a stash of Christmas decorations and a rack strewed with leather kimono belts.
But Doug Howe, executive vice president of merchandising, says the mix of items has changed. Electronics have become less of a focus as it has become easier to find and price-compare such items on the Web. QVC's sales in this category have been soft lately.
"When you can go out and Google the specifications of an electronic item you want to buy, it has dramatically changed how we face into that business," Howe says.
QVC has also become less reliant on jewelry and is placing more emphasis on beauty products and high-end kitchen appliances. Martin Pyykkonen, an analyst at Rosenblatt Securities, says this merchandising shake-up has been a smart move.
"Frankly, the margins are considerably better," Pyykkonen says. "And if you've got customer loyalty and attention, you can run with that pretty well."
In these and other categories, QVC is focused on providing exclusive products, meaning an item sold only on QVC or offered in not-otherwise-available colors or packaged with special extras. For example, on a Clarisonic Mia2 Sonic Cleansing System, QVC had a limited-time exclusive on four colors of the scrubbing gadget. The company also offered it in a configuration different from what was available from other retailers, including a year's supply of brush heads.
QVC is also experimenting with commissioning some fast-fashion apparel that would allow it to lean in more quickly to new trends. None of that merchandise has hit airwaves or the Web yet.
All of these changes are aimed at sustaining QVC's staggeringly loyal customer base: 90 percent of the company's revenue comes from repeat shoppers, and its average shopper buys 22 to 25 items a year from QVC.
That is why the company has invested heavily in new ways of reaching customers, such as something called the "post-purchase video." QVC has created a stable of Web-only videos on such topics as how to assemble a Dyson vacuum cleaner or four ways to style a scarf. On the day it expects a product to show up on a customer's doorstep, QVC will automatically email her the related how-to video. Miller says these emails have "extremely high" open rates and watch rates.
They do little to directly stimulate sales, but chief information officer Linda Dillman says that's not the point. "It's trying to anticipate information she's going to need [and thus] to make this a different place to shop," Dillman says.
It's not just the products, though, that have been essential in cultivating customer loyalty: QVC has built a stable of on-air hosts that regular shoppers have come to trust as experts. The channel's latest breakout star, cookware show host David Venable, has seen more than a half-million copies of his cookbooks sold on QVC.
QVC bucks trend
When you consider the changes that are upending the retail and media industries, things shouldn't be looking so hot for QVC. Consumers are ditching their cable subscriptions. E-commerce players such as Amazon have shaken our shopping routines. And merchants are obsessed with luring millennials, a demographic that older-skewing QVC is still working to reach.
And yet, QVC's U.S. division grew sales 4 percent last year, to $6.1 billion, and increased operating income 4 percent, healthy growth in a tepid year for the broader retail industry. It added about 2 million shoppers to its customer base.
Experts say QVC has navigated the digital era so well because it has long been focused on reacting to shoppers on the fly and discerning at a micro level what pushed the sales needle - something many brick-and-mortar retailers are just starting to do now.
"If you think about Amazon and other e-commerce retailers and all the data that they have, QVC is really the first iteration of that," says Matt Nemer, an analyst at Wells Fargo.
Still, QVC's innovations have not completely protected it against the chief challenge to its business. Although its typical mobile customer is a woman in her 30s, the retailer overall remains heavily dependent on aging baby boomer shoppers.
"While they're doing fine now, with their reliance on this type of consumer, 10 to 20 years down the road, it's going to be a different story," says Michelle Grant, head of retailing at research firm Euromonitor International.
Going after younger age
QVC likes to say that its typical shopper is 35 to 64 years old, a very wide range that makes it hard to tell just how urgent this issue is for them.
But Liberty Interactive, the company that has wholly owned QVC since 2003, made a bold play this year that seems aimed at snuffing out the age problem. Liberty spent $2.4 billion to acquire Zulily, a flash-sales (or deal-of-the-day) site that has gained a strong following with millennial moms.
George sees many similarities between the QVC customer and the Zulily customer, including that each is largely female and tends to view shopping as a form of entertainment.
But, crucially, George says, Zulily is "definitely catching customers a little bit earlier in their life cycle than we are."
The deal just closed Oct. 1, so the brands are in only the earliest stages of figuring out how to cross-pollinate their audiences. George says that perhaps in the future, Zulily or its vendors could have a TV presence and that perhaps they could try to lure Zulily shoppers to QVC with targeted content and promotions.
As QVC moves deeper into the online fray, it must continue to watch out for competition from the rival it most closely resembles: HSN. That St. Petersburg, Florida-based network was the original home-shopping channel. QVC (short for "Quality, Value, and Convenience"), founded in 1986, has since overtaken HSN in sales; the $6.1 billion it pulled down in the United States last year was more than double the $2.5 billion reported by HSN. And QVC now has networks in countries such as Germany, France and Italy and a joint-venture in China, while HSN is only on-air in the United States. (QVC's parent company, Liberty Interactive, owns a minority stake in HSN.)
QVC channels are now available in 340 million households worldwide, and the company plans to add a new international market to its lineup roughly every 18 to 24 months, with an eye on emerging markets such as Brazil and India. But even as it is beamed into more living rooms across the globe, QVC is keenly aware that young shoppers stateside are often not signing up for cable subscriptions.
George says this doesn't worry him terribly. Just as people have largely continued to watch sports live, George says, QVC customers seem to like the sense of urgency created by shopping in real time, whether they are watching via cable or Internet streaming.
"I don't think live goes anywhere," George says.
And yet, George concedes, innovations could keep bending that strategy.
"It's not inconceivable that 10 years from now, the QVC shopping experience on TV could be very different," George says.
QVC by the numbers
45%: Online sales' percentage of QVC's total U.S. sales.
55%: Phone orders' percentage of QVC's total U.S. sales.
27%: Web orders' percentage of QVC's total U.S. sales.
18%: Mobile orders' percentage of QVC's total U.S. sales.