April 2, 2004, 12:00 AM

TV? Internet? Both

“We’ve done well with our Internet operations thus far, but we really need to take it to the next level,” says Marty Nealon, HSN’s new U.S. president of web and TV.

When most people hear the words Home Shopping Network, the Internet doesn’t usually come to mind. More common are images of flashy television presentations with lengthy descriptions of product attributes.

But as HSN matures and broadens its product range, the Internet is expected to take on a more important role within that company.

No one knows that better than Marty Nealon, an experienced retailer and merchandising manager, who took over as U.S. president in January of TV and web operations at HSN, a unit of IAC/InterActive Corp. In her new capacity, Nealon, who had been HSN’s executive vice president of merchandising, found an Internet-based business that had a lot of potential, but was still in its infancy in terms of what it could do for the company that helped pioneer the sale of merchandise on TV.

The next level

“We’ve done well with our Internet operations thus far, but we really need to take it to the next level,” says Nealon. “I want to raise the bar on the content and the variety of all the merchandise that we offer. The dot-com operations are high on my list.”

As Nealon and her team look to beef up the Internet operations, one thing appears clear: The Internet will play an important role in a broader strategy for HSN to incorporate more classic products into a merchandise offering that today is best known for such things as glitzy jewelry, beauty creams and novelty appliances.

Thus far, much of HSN’s use of the Internet has been to support its TV sales operations. In the future, it will need to do more to generate its own sales. “HSN has made great use of the Internet to drive sales back to TV,” says Patti Freeman Evans, analyst with New York-based Jupiter Research Inc. “It uses things like broadband telecasts to get Internet visitors excited about what it is selling on TV. But what HSN has done so far is use the Internet to drive TV sales, not vice versa.”

Nealon is well aware that there is a lot more that can be done with the Internet as a sales and distribution channel. Although Internet-based sales were up 34% in the past year, Nealon’s not satisfied with that success. Internet sales still only accounted for about 15% of HSN’s sales in 2003-up from 12% in 2002. That percentage is in line with the proportion of sales that occur on the web at other TV-based retailers. ShopNBC.com, for instance, accounts for 17.5% of sales at ValueVision Inc.’s ShopNBC. Nealon believes that the web can account for a much higher share of HSN’s sales, although she declines to identify a specific goal.

Cut to the chase

Many think she is just the person who can lead that effort. While HSN is known for being innovative in the direct marketing industry, Nealon herself brings a reputation as a smart retailer and top executive to her new position, says Barbara Tulipane, president and CEO of trade group the Electronic Retail Association, which represents TV marketers and of which HSN is a member. “The word on the street is that she has great leadership skills and can cut to the chase to get things done,” Tulipane says.

And there may be a lot that needs to be done on the Internet side at HSN. The need to grow the Internet business became most evident to Nealon last November when HSN unveiled a new web site. The site was highly touted for its snappy graphics, expanded product line and strong support for its sister television operations. Among the new features was the ability for browsers to view live HSN TV telecasts through their Internet connections. But as Nealon explains, “It only took us about 5 seconds after the site debuted to come up with a new list of features that we wanted.”

The live telecasts may be state-of-the-art for now, but Nealon is looking to the future already. Currently, web site visitors can view streaming video 24 hours a day, but they can only view what is showing on TV at that moment. In the future, Nealon would like to give customers the ability to call up mini-clips that are customized for the Internet. Then, the viewers would control which products they want to see at any time. Nealon is also interested in giving web browsers the ability to call up multiple items on the same screen for comparison-shopping.

Other technology is also under consideration. An earlier trial of live chat, for example, proved valuable in letting customers discuss products with sales reps and personalities. She notes that some personalities who held chat sessions had large followings that justified the cost of setting up live chats, but others did not. Future chat sessions will be limited toward those personalities who appear to have a large following. Nealon says she is disposed toward bringing chat back, but on a smaller scale.

She is leaving much of the technical and operational details, however, to the technicians and Internet specialists. In April 2003, HSN hired a leadership team for HSN.com. That included the appointment of Frank Han as executive vice president and general manager of HSN.com. Among his previous ventures, Han co-founded etoys.com, and more recently served as e-commerce manager for a chain of casino hotels. Nealon says she is looking to Han’s team to come up with the strategies to enhance the HSN customer’s Internet experience. “We’ve been growing our Internet team and bringing in a lot of new talent,” she says.

By allowing Han and his team to figure out the technical and operational details, Nealon can focus on what she knows best-developing a merchandising strategy that takes advantages of the Internet’s assets.

Converging profile

“Our customer profiles of those who buy directly from TV and those who buy over the Internet are consistent, so we believe many of our Internet customers are people who are simultaneously viewing the merchandise on TV or are making purchases subsequent to the TV viewing,” Nealon says.

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