TV Shopping - Seeing is believing

While high street retailers are struggling, the TV shopping channel appears to have found a way to encourage people to buy all manner of products from the comfort of their armchairs. Georgina Caldwell investigates how this channel keeps on growing.

Although the number 13 strikes fear in even the least superstitious of people, for QVC UK the number has never seemed so lucky. Approaching its 13th year, the channel has become so successful that brands are queuing for air space. For the beauty industry the TV shopping phenomenon has been revolutionary – improving access to niche brands and contributing to a wholesale shift in attitudes to selling.

Within the current retail climate the success of the TV shopping channel is especially impressive. This year has seen a number of high profile department stores, brands and perfumeries withdraw from ailing markets and close unsuccessful stores. In the last year alone Japanese Kanebo, L’Oreal’s Helena Rubinstein and Swedish direct sales company Oriflame have all closed their operations in the UK and Ireland, perfumery chain Sephora has bowed out of the UK, while the German dm chain has pulled out of Italy. Department stores House of Fraser and Dickens and Jones have closed stores in London, US drugstore chain Albertson’s put itself up for sale last September after struggling with the pressure from discounters, and The Body Shop has missed out on sales targets in the US. In contrast, TV shopping is expanding worldwide, sales are buoyant and the increasing number of digital viewers and linked internet sites are only helping to further this trend.

Credit and credibility

Considering TV shopping has spent the past decade as the butt of a joke within the retail world, broadcasters are now having the last laugh. The channel has managed to shrug off its reputation as a tacky way to shop, with even Vogue touting the experience as "quality, value, cool" in 2004, and instead has established itself as a serious purveyor of niche and prestige brands.

QVC UK, for example, stocks 113 beauty brands, including Elemis, Crabtree & Evelyn, Decléor, Philosophy, Pout, Prescriptives, Lab Series, Shiseido and Molton Brown and the company is bombarded with requests to go on air. “Time is our square footage,” says Lorna McKay, the original beauty buyer for QVC UK, now an independent consultant for the company’s beauty portfolio. “We’re having to be more and more choosy because air time is limited. But we always strive to showcase special, effective brands with a limited availability on the high street.”

Home Shopping Network (HSN) boasts Shavata eye brow kits, Urban Decay and Italian brand Perlier Kelémata among its portfolio, while QVC Japan features L’Occitane and Bare Escentuals under its beauty umbrella.

The formula for this success appears simple: broadcasters can reach every home in the country that has access to a digital signal, which makes for large audiences and correspondingly large sales. For the US that figure is upwards of 85m households and growing all the time. Furthermore, in 2009, when the analogue signal is scheduled to be switched off, every television set in the country will be capable of receiving TV shopping channels. In the UK, 62% of homes now have access to digital TV, a figure that is expected to rise to 90% when the analogue signal ceases in 2012. QVC UK is currently available in 16.6m homes. Chinese shopping channels reach 700m viewers and in Japan 40% of all households now receive cable TV, a figure that has doubled in the last year.

According to NPD Group, TV sales garnered a 13% share of the $40bn US beauty market in 2004 and sales have tripled since 2002. Meanwhile, QVC UK reports that net sales between January and June 2005 reached £138.2m, an increase of 14% on the same period in 2004, while 2004’s total sales weighed in at £265.1m (up 17.5% from 2003). Industry sources reveal that total sales for the UK TV shopping market were in excess of £800m.

Japan’s Jupiter channel saw sales soar 40% in 2005, totalling an estimated ¥70bn, while competitor QVC Japan chalked up sales of ¥44.9bn in 2004. The total Japanese TV shopping market is growing 7.2% per year.

Even Germany saw encouraging growth in the market, with the Bundesverband des Deutschen Versandhandels (the national association for direct sales) valuing the TV shopping market at t980m in 2004 – an increase of 22.5% – and the association predicts that 2005 will see the market break the billion Euro barrier. Rob Hunt, ceo of Australia’s TVSN, claims that the channel’s sales have grown 35% year on year since it first aired ten years ago. The channel now sells to one in every ten digital subscribers in Australia and is forecast to yield over A$20m in 2006.

According to QVC UK, QVC US is the largest TV shopping outfit in the world, followed by HSN in the US, which reported sales of $2.4bn in 2004. QVC Germany follows in third place with turnover of t516m in 2004 and expects double-digit growth for full year 2005. The fourth is QVC UK, which shipped 5.6m units in the first half of 2005.

In the comfort zone

However, success in the market can never be guaranteed. The established players may be doing extrordinarily well but, like any young market, TV shopping has had its casualties. Express Shopping Channel in the UK, for example, has suffered from low ratings since it was excluded from the Freeview package and has recently had to scale down live programming in a bid to cut costs.

Nevertheless, the real beauty of the TV shopping format is that it reaches each viewer individually. Whereas in shops customers can be put off by the prospect of queuing and jostling and may be distracted by other brands and promotions, when watching a TV shopping broadcast, viewers are invariably sitting comfortably in their own homes, which enables them to feel relaxed, unintimidated and in control. Most importantly the experience is personal – presenters are talking to viewers in their living rooms and a certain amount of interaction with callers (which varies from broadcaster to broadcaster) only serves to increase a feeling of cosy conspiracy.

McKay suggests that this relationship between the presenters and the viewers is the main attraction for shoppers. "Our viewers can send e-mail or text questions and speak on air to the presenters. This type of interaction helps to build up a rapport." Liz Earle, co-founder of Liz Earle Naturally Active Skincare – one of the original brands to feature on QVC UK and now present on the channel with its own one-hour show – agrees. "TV shopping is a very personal experience. It’s an opportunity to spend individual time with thousands of customers at once. The channel allows direct access to the founder of a company or to the person who created the product. This type of unprecedented access to the source of a product can never be replicated on the high street. You are literally hearing about the product from the horse’s mouth and the constant testimonials from customers serve to reinforce that a product is loved. It’s very reassuring to a viewer."

Reassurance is also something that the TV shopping channel specialises in. Most broadcasters offer a very generous returns policy to encourage shoppers to buy. At QVC this equates to a 30 day no-quibble refund, which the company says is key to encouraging purchases. “Decléor finds that QVC’s one month return policy works excellently, as it gives time for customers to see results," says Carolyn Taylor, commercial director at Decléor. “It’s a buyer’s dream," says McKay, "Our research has shown that there are three main reasons for the channel’s success. First trust, second it is easy and third we give plenty of information to viewers."

The informative nature of the beauty programmes is central to the channel’s selling technique. On QVC UK cross-brand beauty slots are hosted by the company’s resident beauty expert, Alison Young, who interviews guest representatives from the brands, demonstrates application techniques and fields questions from viewers. "We want the programmes to be seen as a trusted guide. That’s an important point of difference to the high street. Our presenters will tell consumers what to buy and what not to buy. We give them the information they need to make the right decision," says Jennifer Bramley, pr manager at QVC UK.

"It’s a real and honest method of communication," explains Kim Buckland, co-founder of Liz Earle Naturally Active Skincare. "It allows for a depth of communication that doesn’t fit onto a pack. We have an hour to communicate the history of the brand, the ingredients, and how to use the products. And it’s as good as talking one-to-one with customers. It gives them a confidence in the brand and helps them to feel that they aren’t just being marketed to, but cared for."

The emphasis is on information, rather than a hard sell and McKay is keen to point out that there is no pressure to buy. "Viewers don’t have to buy, but if they want to they can make an informed choice, backed up by our returns policy."

However, broadcasters are keen to underline that TV shopping is not set up to dilute high street sales. The channel has been termed the cheapest advertising around, because high ratings give a wide exposure to the brand, even if only a fraction of the viewers actively purchase from the channel. Anecdotal evidence suggests that brands stock up on popular products on counter following an appearance on QVC. "It is a flexible retail channel. We can sell in large volumes and it is also a way of advertising our brand in 10-60 minute chunks of air time," says Alexis Murdoch, QVC sales director at L’Occitane. "As it reaches a different audience it can drive traffic to stores. For example, if QVC viewers are excited by a product range they will head to a store or our website. The two channels complement each other." Estée Lauder’s Jessica Lawther, assistant communications manager for Prescriptives, is equally enthusiastic: “Rather than cannibalising our department store sales, Prescriptives has found quite the reverse. Whenever we are on air, our stores notice a huge surge in sales of the featured product and an incraease in new customer footfall. It’s most definitely positive PR for us, akin you could say to broadcast advertising.”

TV shopping is also an ideal way to break into new markets. Liz Earle Cosmetics reports that its expansion plans include moving the brand further afield. In September the range launched on TVSN in Australia and initial sales have been positive. The company is looking to enter other established TV shopping countries such as the US, Japan and Germany, as well as other emerging markets within Western Europe. "We don’t advertise so it’s important that we choose a channel that allows us to explain the brand and backs up our philosophy of customer service." says Earle. Meanwhile L’Occitane’s Murdoch tells ECM that the brand is now present in the UK, US, Japan and Germany.

The different customer base makes TV shopping a particularly worthwhile option for niche or limited distribution brands. First, broadcasters often have a nationwide reach, which means that rural dwellers have greater access to brands that may typically only be stocked in large department stores. Second, the average TV shopper is trackable through his or her personal details and thus customers can be profiled in a way that wouldn’t be apparent from till sales.

The database potential of the channel naturally makes it easier to target specific groups of consumers. This database is also a valuable commodity when it comes to linked marketing. “We’ve only been on QVC for two years and our in-store customer database purely driven by QVC has increased by 20%,” notes Lawther. Recently, Precision Marketing reported that Vector Direct TV Shopping Channel had teamed up with Listlab to sell its directory of 720,000 mail order buyers at a cost of £20 per 1,000.

However the technology available to broadcasters can even reveal idiosyncracies within a specific target audience. By tracking who buys what and when, the channel can assess the potential of a brand quickly and react swiftly to what works and what doesn’t. The presenters are in constant contact with the production staff, who can measure the reaction to certain phrases or cues by means of the sales information that is relayed on screen from the call centres.

HSN describes its typical customer as aged between 25 and 54, earning over $61,000 and female (75% are women). TVSN says its average viewer is 46 and its core audiences are aged 30-35 and 55-58. During the week TVSN’s audience is 90% women, while at weekends the female-male split is closer to 60:40. Jupiter gets over half of its orders from housewives who are in their 40s or 50s, with 10am and 10pm being the most popular ordering hours.

WSL Strategical’s annual survey, How America Shops, 2004, shows that 35-54 year olds are the most likely to engage in TV shopping in the US, with 10% of this demographic having bought something from a television outlet in the last three months, compared to 9% of the 55-70 age group and 6% of 18-34 year olds. In terms of income, those earning between $45,000 and $70,000 are the most likely to purchase through the television medium (12%).

The survey also reveals the nature of the competition. It is clear that despite the resounding success of the TV shopping channel thus far, penetration is relatively low when compared with the other direct sales channels. While 8% of those surveyed had used the TV shopping channel, 34% had ordered from a catalogue and 35% had shopped online. The demographic shift is also skewed towards the internet, with 40% of 18-34s choosing to shop online.

It is perhaps for this reason that TV shopping networks have branched out into linked internet shopping sites in recent years. On the various web pages customers can watch live streaming, or simply place orders at their convenience. The sites also serve as a useful replenishing tool. According to McKay, QVC UK now has a separate internet sales department to cope with the new volume of sales and the internet represents between 12-15% of the company’s total sales. ShopNBC even has web-exclusive products and deals to encourage loyalty to the network and traffic through its site. HSN publishes its programme guide online, as well as offering 25,000 products for sale.

The websites also help channels to offer 24-hour access to products if they don’t already broadcast a 24-hour programme. For those in any doubt about the number of people prepared to buy in the twilight hours, figures from Jupiter – which started 24-hour broadcasting at the end of September 2004 – reveal that 20% of the company’s 35,000 daily calls are answered between midnight and 1am.

On the run

This kind of adaptability and willingness to embrace technology bodes well for the future of the TV shopping industry. Advancements in the TV shopping medium itself are progressing along with the improvements to interactive television technology.

In Malaysia satellite provider Astro has teamed up with Visa to provide credit card decoders incorporated into its satellite boxes. The boxes will come with a separate smart card reader slot into which customers will be able to insert their credit card and make purchases directly from the television.

Meanwhile in Japan plans are afoot to launch an online shopping service that will link broadcasting and the internet in a unique way. The collaboration between Tokyo Broadcasting System and Dentsu (an advertising agency) will enable viewers to buy products that they have seen used in television programmes.

Wan-segu technology is taking things one step further. This is a digital broadcasting system for cellular phones that will also allow viewers to purchase items direct from their mobiles. Although Jupiter started to stream videos via its website to cell phones at the end of 2004, the broadcaster will not be able to participate in this technology until 2008, when it will become available to cable and satellite-based stations. The Nikkei Weekly estimates that sales from internet sites accessed via mobile phones jumped 46.6% in Japan in fiscal 2004.

Across the world in Salford, Manchester, the UK’s first instore TV Shopping channel, Superstore TV, launched in October 2005. Customers can choose to shop from their television at home or visit the store to inspect the goods more closely. Visitors to the store will have the added advantage of being able to participate in the studio action.

Formats such as bid tv and price- drop have also sprung up in the wake of interactive television as consumers are capable of bidding for items through their remotes.

The future of TV shopping in the West may well lie in more advanced technology. However, in the developing countries TV shopping is just beginning to break through as a sales channel. Several operators have made in-roads into the Chinese market and companies such as Television Broadcast and Asia Television are leading the way. The pair are plotting to create five new channels with the capacity for 24-hour broadcasting to China, available from a set-top box for a one-off charge of HK$1,000.

In the Hunan province Hunan Happy Shopping is due to launch this year via the company’s fashion channel and the company has plans to extend the concept through partnering with other local broadcasters.

For both regions the challenge will be to attract a broader spectrum of viewers since young women and men have yet to be convinced of the channel. Perhaps 24-hour broadcasting is an ideal way to attract a younger audience or those who work antisocial hours. “TV shopping should be used for convenience shopping,” says Taylor.