Re-defining
multi-channel retailing
To most retailers, multi-channel means Internet, catalog, store. To ShopNBC it means INTERNET & TV
By Mary Wagner
Merchants that call themselves multi-channel retailers today operate in web, catalog and store channels. But if Eden Prairie, Minn.-based ValueVision Media has anything to say about it, that trio will become a quartet tomorrow, with TV the fourth leg of a new, must-do commerce platform for retailers and manufacturers.
To get there, it’ll have to convince retailers—and a boatload of shoppers who don’t now shop TV—that it’s come a long way not only from the Ginsu knives and Veg-O-Matics that ushered in the dawn of direct marketing on TV 35 years ago, but also from its own early history. The company’s Internet business started out as a liquidation outlet for merchandise left over from its original TV shopping channel, founded in 1990.
Today, it’s shedding that image and working to reposition itself as a marketplace worth the investment of long-established, trusted brands. It’s reaching out to customers with new programming, an improved merchandise mix, and 24/7 streaming of its cable TV programming onto its web site, which is introducing the home shopping network to a new audience. It’s reaching out to retailers with TV/web opportunities that provide branding, an avenue of customer acquisition, and a direct marketing opportunity all rolled into one.
But perhaps the biggest move it’s made to reposition itself with retailers and potential new shoppers alike in the estimated $5 billion home shopping industry is re-branding the former ValueVison TV as ShopNBC. Last June, ValueVision granted NBC stock warrants valued at $35 million for the rights to brand its TV and web shopping network with the NBC name and re-launched itself as ShopNBC. That deal built onto an earlier agreement in which GE Equity and NBC invested $225 million for a 40% stake in ValueVision.
It’s wasting no time in leveraging the NBC logo. In the fall, ShopNBC announced a deal that will wrap programming around sales opportunities with The Spiegel Group Inc., Sony Corp., Lenox Inc., FTD.com, The Musem Company and others through an agreement with Yahoo@ Shopping for an hour-long, weekly program, also to be streamed on the web and on Yahoo.com. It also has launched weekly hour-long programs under the sponsorship of single merchants, such as the Bose hour added to the lineup in November.
And there is no doubt that the NBC name has helped the web and TV shopping network get in the door at retailers and merchant partners who might not otherwise have even taken a look. “When we approached the LPGA as ShopNBC, they told us, ‘If you were ValueVison rather than ShopNBC, we wouldn’t be here talking today,’ ” says Trish Mueller, senior vice president of marketing.
The deal with NBC and subsequent re-branding were smart moves for the shopping network, says retail consultant Paula Baldwin, senior vice president at marketing agency Campbell Mithun. “NBC is an established and highly respected brand, so to extend that branding over the shopping network would predispose consumers to try it,” she says. “Since the beginning of the year, we’ve seen some interesting strategies employed by mainline retailers to attract customers. What many of them find interesting here is the instantaneous nature of the offer. Traditionally, advertising has a delayed effect. What ShopNBC is offering the retailer is a long-form message that incites a phone or online purchase immediately. “
While ShopNBC is in an estimated 50 million households, the network is not Nielsen rated, so it can’t say with certainty how many people are watching which programs. But that’s less problematic for ShopNBC, which offers direct marketing as well as exposure, than it is for purely ad-driven networks. “I can’t tell you exactly how many are watching at a given time, but I can tell you more impactful numbers, such as how many people called in during a program, how many ordered, how much they spent and how many were driven to the retailer’s web site,” says Roy Seinfeld, senior vice president of programming sales.
Undercutting network ads
ShopNBC is pursuing two separate but linked programming initiatives to grow sales among its existing customer base and bring in new customers. One approach aggregates merchandise under celebrity names seeking to leverage their cachet in the e-commerce realm. The celebrity host’s endorsement of merchandise selected for presentation on his or her show, in effect, is the brand. Examples of such programming on the network include the Star Jones Show, hosted by Jones, a fixture on ABC daytime TV’s high-profile talk show, The View. A similar deal with garden writer and syndicated garden-show host Rebecca Kolls is in the works.
The other approach has ShopNBC selling time to branded retailers and manufactures. “It’s just as if they’re buying a 30-second commercial spot or a banner on the web, but it’s an hour-long block of time instead,” says Seinfeld. “We produce that show for the merchant, and during it, they get to sell brand, sell merchandise and acquire customers.” Branded, sponsored shows include those for Bass Pro Shops, the recently announced Yahoo and Bose deals, and others.
The hour-long program slots go for less than typical network rates. 30-second commercial spots on ESPN Sunday Night Football, for example might sell for as high as $100,000. By contrast, an hour on ShopNBC starts at around $50,000 to $60,000 for a turnkey solution that includes all program production, talent, and the use of ShopNBC’s technology platform which provides web site tools like 3-D and zoom capacity for product viewing. The rate structure is a flat fee that doesn’t typically include a sales-based revenue share.
TV content is streamed on the web in two channels; one offering a live feed that’s simulcast around the clock, and the other featuring video that’s created specifically for the web, such as “drop-offs” or extensions of TV programming. Web shoppers can also shop products featured in shows after the show runs, accessing them through a “Week in review” feature that presents the products in a listed format. Prime time programming, in which each hour-long show is a bundle of entertainment, information and shopping opportunities, is beginning to move away from an earlier hard-sell approach to one that delivers programming “more consistent with the NBC brand,” says Mueller.
That means not only increasing production values, but also adding more entertainment. A recent hour-long program on the late Anthony Quinn, for example, spent 20 minutes on his early life and acting career before even mentioning that he also was an artist. The hour was half over before it introduced the merchandise—jewelry interpretations of Quinn’s artwork. Mueller says the shopping network is planning to re-fashion its prime-time programming into a similar format first, with its daytime programming to follow.
If the NBC brand is helping to bring the shopping network new retailers, the web is helping to bring it more customers. About 7.3% of the shopping network’s $386 million in sales last year originated on the web, either transacted directly online or ordered on the phone after being viewed on the web site. The company can distinguish web shoppers from TV shoppers because the two channels list different phone numbers. This year, web sales are projected to contribute $60 million—12.6%—to sales projected at $475 million. While the third quarter of 2001 was a tough one for retail across the board, web sales at ShopNBC soared 117% over Q3 of last year.
The web is critical to growing its retail business, says COO Richard Barnes, in part because even with its distribution in some 50 million cable and satellite TV homes, ShopNBC is still trailing shopping network competitors QVC and Home Shopping Network, which reach 75 million to 80 million homes. “We’ve been growing our cable distribution, but there’s sill a significant portion of the home shopping population that we’re not reaching with our cable programming,” he says. “So part of the appeal of our simulcast is that the Internet gives us the opportunity to reach those people and make them aware of us.”
The web is also altering the demographics of shoppers on the converged network. Traditionally, ShopNBC’s customer base, dating back to its earlier days as ValueVision, has been female and, seemingly at odds with the perception of TV home shopping in some quarters as a downscale medium, relatively affluent. Viewer household income averages $60,000 and above, says Kevin Hanson, chief technology officer. The network has attracted that audience with an emphasis on high-end jewelry offered at discount prices, a product category that’s accounted for about 70% of sales.
On the web, the customer base is about as well heeled or skews slightly lower, says Barnes. But in a major departure from the TV shopper base, it splits along gender lines almost 50/50. The network is using the web to reach customers accustomed to shopping remotely but either not inclined or too busy to shop TV; among them, male shoppers. The network is reaching out to male shoppers by increasing network-type show blocking. That clusters programming geared toward audience segments likely to be viewing or on the web at different times. The Bass Pro Shop hour, for example, is preceded and followed by other male-oriented programming to hold that audience longer.
Not only does that increase the likelihood of conversion, which already averages about 10%, according to Hanson, but it boosts brand awareness for the retailers. And that, in turn, can translate into shoppers. “Say you were on ShopNBC and saw the Bass Pro Shop hour. You didn’t see quite what you wanted on offer, but we did intrigue and entertain you. So you click through to the Bass Pro site, a site you may not even have been aware of before,” Hanson says.
Serving the slowpokes
ShopNBC isn’t the only shopping network to stream live TV on its site, but it’s the first to simulcast 24/7, and the only one operating under the umbrella of a major television power. Even so, the video feed as it appears on the web site looks a bit jerky on the dialup modems that still connect the ShopNBC web site with 80% of its audience. Hanson says that instead of fighting it, for now, he’s working with it. “Everyone knows that if you’re on a dialup modem, the picture is going to look jerky, so we don’t hide it,” he says. In fact, ShopNBC.com actually reduced the usual number of frames per second in streaming TV content on the site so as to deliver an image in which product detail is more clearly discernible to the eye. “It’s almost like changing stills,” Hanson says.
With stills alongside featured products and even on-demand one-minute videos on some products to supply further information, the video simulcast doesn’t actually have to carry the ball on presenting the product to the web viewer, but the simulcast is important as a point of differentiation and a branding element, says Baldwin. “There’s an advantage in that continuity,” she says. “Consumers are increasingly used to sampling retailers in multiple venues. The last thing you want to do is create a disconnect between what they see on TV and what they see online.”
A makeover
ShopNBC faces the challenge of a makeover as it seeks to distance itself from a lowbrow image that’s the legacy of the industry’s early days. And there are the usual roadblocks that accompany the response to a new business model: ShopNBC’s opportunity for retailers spans the direct marketing, advertising, Internet and public relations departments of prospective partners, without fitting neatly into the budget of any single department.
ShopNBC’s plans are ambitious: to leverage the solid gold equity of the bigger TV network in a commercial environment, in a way that benefits all parties without backfiring on its media giant partner. “NBC has demonstrated its willingness to experiment,” Baldwin says. “They’ve played with a number of online initiatives over the past year. They’re willing to take the risk and see what happens.”
The increasing number of retailers and manufacturers willing to get on board with the new concept, and the sales growth rate so far suggest it’s a risk worth taking, particularly in the current climate. “People are seeking comfort and security of home and community as a physical and an emotional space,” says Baldwin. “If you look at ShopNBC and the space in which it operates, you have an interesting convergence of easy to access home-based retail channels. Blend that with what you’re seeing in consumer behavior now, and the time is right.”
mary@verticalwebmedia.com
