With a new and broader Internet plan, Shop At Home TV surfs for new channels of web shoppers
By Mark Brohan
Though its name invariably conjures up images of TV infomercials and smiling hosts hawking the deal of the minute, Shop At Home Network LLC is spending considerable time and resources dialing into a far more reaching sales channel: the Internet.
Founded almost 20 years ago as a satellite and cable TV home shopping network, Shop At Home Network sells about $300 million worth of merchandise each year and reaches about 54 million U.S households with cable access.
Distant fourth
But in the world of TV shopping, those numbers are small and make Shop At Home Network a relatively minor player and perennial distant competitor to shopping channels with bigger organizations and sales, including QVC Inc., with annual TV and web sales of $5.7 billion, Home Shopping Network, $2.4 billion, and ShopNBC, a $649 million-a-year business unit of ValueVision Media Inc.
These days Shop At Home Network, like all other TV-oriented merchants, is asking "Where do we go from here?" and the answer is clearly to the Internet and e-commerce. Rather than devote all of its time and resources to TV shopping, a single sales channel that generates annual growth of only 6% to 10%, Shop At Home Network is betting its future squarely on web retailing, which is growing at 25% a year. "We intend to grow on the web in ways we can't as a single channel retailer," says Adam Rockmore, senior vice president, marketing and interactive commerce at Shop At Home Network, a business unit of The E.W. Scripps Co. "We see a whole new audience we can reach with a well-defined and executed e-commerce plan."
One of the ways that Scripps is counting on to grow its e-commerce base is by consolidating more web shopping activity at ShopAtHomeTV.com, beginning with the online stores for three of the company's most widely watched cable channels. Under that plan, all online sales for TV programs the Food Network, Home and Garden Television and DIY Network will take place on the ShopAtHomeTV.com platform. Web shoppers at Home and Garden Television and DIY are already being redirected to ShopAtHomeTV.com, not to be confused with ShopatHome.com, a completely separate site. The Food Network's web store will be integrated in the first half of next year.
In addition, it's beefing up the merchandise content, including adding more high-end home décor and kitchen products.
Middle niche
However, retailing analysts question if Shop At Home Network can build substantial market share against bigger and more established TV and web retailers at this late date. After nearly five years of selling online, Shop At Home Network generated estimated e-commerce sales of just about $75 million in 2004. In comparison, QVC, a unit of Liberty Media Corp., racked up 2004 web sales of $739 million, while HSN.com, the web arm of Home Shopping Network, posted e-commerce sales of $303 million and ShopNBC.com had estimated Internet sales of $131 million, according to The Internet Retailer Top 400 Guide to Retail Web Sites.
Analysts point out that not only are Shop At Home's competitors larger but they are more nimble as well. IAC/InterActive Corp., for instance, the parent of Home Shopping Network, this spring took a much larger step into multi-channel retailing with its acquisition of Cornerstone Brands for $727 million. The justification for the purchase was the e-commerce operations of Cornerstone's six brands: Ballard Designs, Frontgate, Garnet Hill, Smith + Noble, The Territory Ahead and TravelSmith, which have combined web sales of more than $550 million.
To date Shop At Home Network has languished as a smaller web retailer and home shopping channel in large part because of its narrow merchandising niche--50% of all online and TV sales are made by an audience of mostly middle age and middle income women who like to purchase inexpensive jewelry and collectible coins. In 2004, ShopAtHomeTV.com generated monthly traffic of about 1.6 million visitors who spent about $50 each time they made a purchase, according to comScore Networks Inc. and the Top 400 Guide.
In contrast, larger home shopping channels with web stores such as QVC, Home Shopping Network and ShopNBC generate monthly traffic of 10 million visits, 6.6 million and 4.8 million respectively, according to comScore. The average order is also bigger: QVC.com shoppers spend about $55 each time they shop online, compared with $75 at both HSN.com and ShopNBC.com.
To achieve greater economies of scale, let alone take market share and sales away from its bigger rivals, Shop At Home Network must implement a broader e-commerce plan that delivers better short-term web sales while identifying longer term Internet opportunities, says Kent Allen, founder of The Research Trust, a San Francisco e-commerce and interactive marketing research and consulting firm. "Having a plan for a new e-commerce strategy is one thing, but putting together all the pieces and going after a broader channel is a very tall order," he says. "If they are going to pull off a new approach, they will need to know who exactly their e-commerce customers are and figure out precisely their reasons for buying online."
That, in fact, is exactly what Shop At Home is doing. Shop At Home Network and Scripps researched Shop At Home's audience and learned that the typical viewer was more upscale than the typical buyer at ShopAtHomeTV.com. The typical viewer of Food Network or Home and Garden TV, which are two of the most widely watched cable channels, is older, web savvy, has annual household income of more than $70,000 and is twice as likely as the average viewer of cable television to shop online or use the Internet to research a major purchase.
Rebuilding
It is this new base of upscale buyers, the 12 million viewers hooked on Scripps programs that tell them how to cook a gourmet meal, hire a landscape designer or do a home makeover, that Shop At Home Network sees as a lucrative new audience of web shoppers. To reach that audience of potential higher end shoppers, Shop At Home Network is putting in place the right combination of merchandise and promotions that will attract affluent viewers.
But it is also rebuilding ShopAtHomeTV.com and bringing in a new e-commerce general manager. In June, Scripps hired Geoff Smith, former president of e-commerce and business development at Personal Creations Inc., as senior vice president of interactive commerce.
Scripps is also rolling out a redesigned site with an entirely new look and feel. The new ShopAtHomeTV.com site, designed by Fry Inc. and scheduled for rollout this month, features more product graphics, product pages with snappier text, rich media applications that enable shoppers to look more closely at merchandise details and enhanced tools that personalize the shopping experience. Shop At Home Network is also regrouping its product portals, using bigger images to drive traffic to featured merchandise on the home page and adding faster site search using a new program from Endeca Technologies Inc.
Implementing a fresh look and feel is critical to Shop At Home Network to reach a more diverse and upscale audience, Smith says. "With this redesign we are going to target more high income and lifestyle oriented customers with more merchandise and presented in such as way that motivates them to visit ShopAtHomeTV.com and buy," Smith says. "We know who our prime customers are, but we're counting on a better web site to deliver the experience."
Going forward all e-commerce transactions with the exception of Food Network will be processed by ShopAtHomeTV.com. Except for drop-shipped products, all orders will also be picked, packed and shipped from Shop At Home Network's two distribution centers in Nashville, Tenn. "It makes sense to bring more of our Internet activity under the Shop At Home umbrella," Smith says. "Having one uniform platform will help us execute faster and react more swiftly to change."
One area where Scripps and Shop At Home Network are looking to make substantial change is in packaging Scripps' highly viewed lifestyle programming and celebrities with merchandising strategies that generate more e-commerce activity. For instance, Shop At Home Network in June announced a new marketing and merchandising deal with chef and Food Network celebrity Emeril Lagasse. He will host a series of three cooking specials on Shop At Home TV and weekly smaller segments and use the home shopping channel and ShopAtHomeTV.com to market products for his private-label line of cookware.
Cooking up a winner
Prior to the first TV special in July, Shop At Home Network developed a special e-mail marketing campaign and then broadcast the air date along with a special promotional offer on Emeril cookware to its opt-in list of 14 million subscribers. The result during the Emeril event was a 130% surge in estimated daily visits to around 125,000 and a 60% increase in estimated average daily sales to about $325,000, according to statistics from comScore Networks Inc. and The Top 400 Guide. "Emeril's popularity with Food Network viewers and now Shop At Home viewers is a good example of how we can leverage our Scripps cable audience and generate more online sales," Rockmore says.
To drive even more traffic off Scripps programming, Shop At Home Network has made the shopping portals for Emeril cookware, Home and Garden TV and DIY network more prominent on its home page and linked ShopAtHomeTV.com to the web stores on Home and Garden and DIY. Now a visitor who clicks on the e-commerce link on various Scripps network sites is redirected to ShopAtHomeTV.com where the visitor can shop and make a purchase. With stronger synergy across other Scripps cable channels and web sites, Shop At Home Network clearly sees its future as a broader web retailer of home, garden and kitchen merchandise to online shoppers with aspirations of living the good life.
But Shop At Home Network still has its work cut out. The cable network has posted substantial losses in each of the last two fiscal years. In 2004, Shop At Home Network increased total sales 23% to $293 million from $238 million in 2003, but the business also posted a loss of $22 million in 2004 and a similar loss in 2003. For the second quarter of 2005, Shop At Home Network generated revenues of $86.9 million, up 31% from the same quarter in 2004, but the unit's net loss was $7 million, compared to a loss of $2.7 million for the second quarter of 2004.
Scripps says the losses are attributed to the ongoing investments in merchandising, technology and personnel the company is making in Shop At Home Network's e-commerce future and revised web retailing strategy. But industry analysts say that to further enhance performance, Shop At Home Network should be looking at ways it can leverage comparison-shopping site Shopzilla, which Scripps bought in June for $525 million. Shopzilla, formerly BizRate.com, features 31 million products from 55,000 merchants and hosts 1 million new consumer reviews of online stores and products each month.
The Shopzilla advantage
So far Scripps is keeping its renewed e-commerce investment in Shop At Home Network and its acquisition of Shopzilla as two separate transactions. "We may look at some synergy later, but right now we're concentrating on our e-commerce initiatives," says Rockmore.
But as Scripps rolls out a revised web strategy tied to boutique retailing and an audience of shoppers who like tuning into several of the most highly watched niche cable channels, Allen says Shopzilla may hold the key to identifying targeted buying behavior and understanding what's motivating serious home and garden shoppers to buy.
"The home and garden category is one of the most frequently visited on BizRate.com (Shopzilla)," Allen says. "Just the sheer amount of aggregate data Scripps can analyze for its other e-commerce sites to identify buyer behavior is a real plus. That's one potential web retailing advantage Scripps will have over other media companies."
Moving past its history
Most TV retailing is conventional and built around a single concept: selling in large volumes the current products and merchandise viewers see on their screen at any given moment. To date most TV retailers have built their e-commerce sites mainly to provide ongoing sales and marketing support to their TV channel.
But if Shop At Home Network can succeed in getting past its history as a relatively small TV retailer and instead concentrate on making a bigger and better name for itself on the Internet, Rockmore says there is still time to become both a bigger, and better, multi-channel retailer.
"We are not constricted to what we can do on the web," he says. "If we do this right, we can grow in ways we never could as just a home shopping channel."
mark@verticalwebmedia.com
