TV’s Still Key in Luring Home Shoppers

REVAMPING SHOPHQ ADDS SIZZLE, NEW PRODUCTS IN PURSUIT OF HSN, QVC
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After two decades of experience in the television and retail fields, ShopHQ CEO Mark Bozek believes he has a bead on what the struggling home-shopping channel needs to lift it out of its recent doldrums. And that involves more than just prettying up its website.

“The way we make our money is by selling merchandise and as much of it and as many dollars per minute [of it] as you can,” Bozek told Multichannel News. “The most interesting part of this world, as you look at all things digital and all things commerce online, is that having access to 87 million homes is far greater than having 6.7 million unique visitors a month to a website.

“If you can leverage that in a way that made it much more of a destination far more often than just when the customer was in the mood to shop; if we can do that we have really accomplished something,” he said.

While TV homes are important, the company first has to make sure it has the right products to sell, said Feltl & Co. analyst Mark Smith, who follows ShopHQ parent ValueVision Media for the Minneapolis-based boutique investment bank.

“There is real value there,” Smith said. “They have got to get their merchandising right. If they can figure that out, then those 87 million homes are worth something.”

To do that, ShopHQ is taking a page from bigger TV retailers like HSN and QVC by focusing on proprietary products and brands that differentiate it from the competition. Part of that will also be establishing a new brand identity for ShopHQ, and Bozek is actively talking to vendors to help develop the products that could set the network apart.

While HSN and QVC focus on international endeavors and online retailing, ShopHQ will focus on revamping its television presence, Bozek said. And though it has a long way to go, just 60 days into its new plan the retailer is making progress and even managing to break a little ground as it moves to reinvent the company.

After years of sluggish performance, ValueVision Media emerged in June from a proxy fight that saw it jettison its top management and most of its board in favor of a slate of directors with varied and vast experience in retail, television production and cable. Bozek, a 20-year veteran of the home-shopping wars — he started as an executive at QVC in 1994 — and a former CEO of HSN, joined a slate of high-profile directors put forth by activist investor The Clinton Group to shake up the company.

Bozek, who was named CEO on June 23 after Clinton Group’s plan was approved by shareholders at ShopHQ parent ValueVision Media’s annual meeting, joined a slate of directors charged with turning the newtwork’s sluggish ship around, including Fremantle Media North America president Thom Beers; former Saks Fifth Avenue president and chief merchandising officer Ron Frasch; former Time Warner Cable chief operating officer Landel Hobbs; former HSN chief financial officer and COO Bob Rosenblatt; and former QVC senior vice president and marketing head Fred Siegel.

And sluggish it has been.

ShopHQ has lagged far behind its competition in terms of revenue share — it had about 7% of the market in 2013, compared to 26% for HSN and 67% for QVC. Its revenue per home, at $7, was about one-third of closest competitor HSN ($24) and one-eighth of QVC ($57).

In the second quarter, revenue rose 5% to $156.6 million and adjusted cash flow rose 45% to $5.5 million from $3.8 million.

But even at a distant third place in what is essentially a three-way race — its $655 million in annual sales significantly trails first-place QVC with $8.6 billion and No. 2 HSN with $3.4 billion — Bozek said he sees ShopHQ’s size as an advantage.

“If we act our size, being more nimble and scrappier enables us a competitive edge that our direct competitors don’t have, because we have, like a new television network, a lot of white space,” Bozek said. “You start with a couple of anchoring shows, and you have to build around those shows other shows that also attract an audience and you program dayparts.

“For us, it’s the same thing — we have a lot of white space and a lot of new areas that we need to fill and different categories of merchandise that we aim to fill,” he said.

Bozek is a big proponent of what he calls “A-live” TV.

“I’m obsessed with the notion that if we’re going to be a live broadcaster, we better look like we’re alive,” Bozek said, adding that could mean simply presenting products and information in a different way or through different technology.

“When you talk about things like spontaneity, it’s completely based on impulse,” Bozek said. “You don’t need it, but you’ve got to have it. With directors like Thom Beers, we have a lot of opportunities to enliven how we present our products and programming.”

That concept is something that director Beers alluded to in a company video segment just prior to the June proxy vote. Back then, Beers, a reality-TV pioneer, spoke of taking some of the interactive aspects of TV talent shows and applying them to ShopHQ to create a “seamless entertainment transactional experience.”

SELLING ENTERTAINMENT

A prime example of that approach is Mark Cuban’s American Dream, a show starring the Dallas Mavericks owner, investor and Shark Tank panelist, along with a lineup of nine entrepreneurs hawking their own products and inventions. Products have ranged from “WriteyBoard,” a portable white board, to “The Breathometer,” a pocket-sized Breathalyzer.

Bozek said the Aug. 12 two-hour premiere of the show doubled ShopHQ’s audience for that time slot, an audience that stuck around for an hour after the program ended, “when we were selling iPads,” Bozek said. Cuban’s show returns on Oct. 8 with three one-hour episodes.

Other celebrities, such as former Chicago Bears head coach Mike Ditka and Real Housewives of New York cast member Countess LuAnn de Lesseps, also sell products on the channel. Bozek said there are plans for more, but didn’t want to reveal details.

Smith said that approach appears to be making headway, adding that ShopHQ’s size is an advantage there as well.

“Being the smallest company in the space gives them the opportunity to take risks,” Smith said.

While ShopHQ continues to hunt for new ways to present its programming, Bozek knows that developing proprietary products will be an important part of its future success.

PROPRIETARY PUSH

The push toward proprietary brands is one that other players in the space have been touting for years. For example, HSN has recently launched a line of proprietary DIY and lawn-and-garden products with HGTV, in addition to more traditional categories like apparel, with supermodel Iman and designer Diane Gilman. QVC also has its own line of proprietary apparel from Denim & Co. and Isaac Mizrahi, as well as in such categories as home, cooking and jewelry.

Bozek said ShopHQ is working closely with vendors on proprietary products.

“My gut and my goal is that we will be defined by all the proprietary brands that we develop over the next six to 12 months,” he said. “Those brands will define what we are all about. I don’t think reverse engineering, starting with the brand and retrofitting product to fit the brand, is the way to go. I think the brands we launch exclusive to us will help us define the difference between our competition in the TV-shopping space, and our competition in the online space and our competition in the bricks-and-mortar space.”

Adding to that sense of identity is a recently opened merchandising office in New York. The hope is that ShopHQ will use the location — and perhaps a future satellite office in Los Angeles — for broadcasts at least once each week.

And while Bozek said that ShopHQ is “very much on the rails” regarding its plans for growth, he also realizes that making bold predictions can only get a retailer in trouble.

“All of this excitement and all of the ideas we have are part of an evolution and not a revolution,” Bozek said. “This is not a process where I would say to anyone that five years from now we’re going to be this. I think five years from now nobody has a clue what will happen in this space. If we do what we’re supposed to do right, the goal is to have these things working in the next six months to a year to move the needle and create more sales.”

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