For QVC and HSN, Amazon and Walmart Loom Large

Online revenue makes up more than half of home-shopping networks' total

Author: Andria Cheng

July 6, 2017

The disruptive changes in the retail world have resulted in yet another tie-up: that between QVC and HSN, the two biggest US home-shopping networks eager to recast themselves as video commerce players in the age of increased online shopping dominated by Amazon.

The $2.1 billion marriage, in the form of QVC parent Liberty Interactive’s all-stock offer for the 62% of HSN it doesn’t already own, will place QVC, its smaller rival HSN and online retailer Zulily that Liberty bought in 2015 all under one roof. It also will include HSN’s Cornerstone unit, which includes apparel and home goods brands such as Garnet Hill and Ballard Designs.

The marriage makes plenty of sense in many ways: It will  create a combined company, which will be renamed QVC Group, with $14 billion in global video commerce sales and many cost-cutting and cross-marketing opportunities. More importantly, as cable TV households decline, the combined company’s $7.5 billion in online sales, including $4.7 billion from mobile-device shopping, will rank it as the third-largest ecommerce and mobile commerce player in North America and US respectively after only Amazon and Walmart, the companies said in a presentation on Thursday.

The combined business “will benefit from increased scale to more effectively compete in the evolving retail and digital landscape,” the companies said. For instance, HSN’s Shop by Remote feature will be extended to QVC while their five US based networks can create complementary programming. Meanwhile, QVC can help bring brands sold on HSN, which doesn’t have an international footprint, to QVC’s overseas markets. There’s also the opportunity to make more of QVC’s 8 million US customers, 6 million of whom don’t shop at HSN, buy with the new sister site.

Still, many of the benefits aside, the new company will face some big challenges. The transaction is coming at a time when both companies’ US sales have declined despite growing online and mobile sales. HSN, for instance, saw a 4% decline in Q1 sales while online sales rose to 54% of the total, up from 52% a year earlier. At QVC, Q1 US sales dropped 3% as ecommerce sales rose to 54% of the total from 50% a year earlier.

Those declines weren't just a one-quarter thing. According to Euromonitor data, total industrywide home-shopping network retail sales in the US and globally have declined an average of 2.9% and 2.3% respectively between 2011 and 2016. 

As large as the combined company will be, its online sales still will trail far behind those of Amazon and Walmart. Amazon generated $136 billion in total 2016 sales, including nearly $95 billion in product sales. And Walmart's online sales, counting all of its various brands, topped $15 billion, according to eMarketer Retail estimates.

And the new company will have find ways to match the sharp gains in traffic Amazon and Walmart are registering. According to Hitwise, over a two-year period ended June 2017, visits to Amazon.com and Walmart.com increased 50% and 31% respectively, but combined traffic to QVC.com, HSN.com and Zulily.com declined 9%, with lower visits actually seen at each one of them. The three sites’ combined 911.7 million visits in the year ended June represented just 5% of what Amazon generated and 27% of what Walmart had, Hitwise data showed.

The Hitwise data also shows that the QVC Group will have to deal with comparison shoppers: A good 93% of visitors to any of QVC, HSN or Zulily sites also visited Amazon.com within the first six months of this year, and 74% of them went to Walmart.com. Even though both QVC and HSN tout exclusive partnerships and an interactive shopping experience that entices their loyal repeat customers, many of the brands they carry—Skechers, Apple, KitchenAid and Dyson are just some examples—can be easily found elsewhere. 

Meanwhile, even though both QVC and HSN have plenty of loyal shoppers—at least 90% of their respective sales come from repeat or reactivated customers—a Slice Intelligence study of their customer demographic profile suggests they also  have to work harder to attract the coveted millennial and other younger shoppers: more than two-thirds of their customers are 45 and older while those under 34 represent less than 20% of their respective customers. 

Photo by Deniz Altindas on Unsplash


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