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HOME SHOPPING EYES A NEW MARKET HSN INKS DEAL WITH PRODIGY; QVC ALSO EXPLORING ONLINE VENUES

By Published on .

Home Shopping Network and QVC are plunging into the murky waters of online shopping.

HSN last week announced plans for an online "store" on Prodigy starting in September and expects to sign up with CompuServe for a similar service. QVC is in discussions with virtually all of the major online systems for its own interactive shopping service, slated for start-up by March.

Both are seeking new distribution channels for their merchandise, since industry research shows just 8% of Americans ever buy from home-shopping shows.

Instead of watching a parade of products on TV, however, online users will be able to choose which products they want to see.

Prodigy users can order merchandise at the flick of a button, using credit-card and shipping data already supplied to the online service.

But the profile of the average TV home-shopper-a middle-age, lower-income female-is markedly different from the online subscriber, who's more often a white-collar, younger male. Moreover, TV home shoppers flock to jewelry and apparel, while online users are more interested in electronic gadgets and sporting goods.

"They're not 47-year-old people buying cubic zirconia, but the product drives the audience," said Jefferson Gentry, president of HSN Products, which is overseeing the Prodigy venture.

HSN and QVC will alter their selling formats and merchandise mix for the cyberworld, hyping sports memorabilia, small appliances, computer equipment and other gear.

"It would be misguided of us to try to shovel our [existing] service on there," said Stephen Tomlin, QVC VP and general manager, interactive technologies.

"We have to come up with a business model they want to participate in. If anything, the PC is personalizable; it should be a filter for you and allow you to find things that are interesting to you and not to someone down the street," Mr. Tomlin said. "Without that, you're trying to be some lame catalog online that really offers nothing new and as a result is unlikely to be successful."

QVC is developing what it calls a "smart agenting" system to help users navigate through interactive shopping formats. And HSN will operate an electronic bulletin board on Prodigy, enabling cybershoppers to "chat" with HSN "hosts" in an approximation of its TV call-in gabfest.

In merchandising, HSN will also focus on discounted "short lots" of merchandise that are too few in number for TV sales but can easily satisfy the more limited demand of online users, who are far fewer in number than the cable TV audience.

Online, "we'll probably do [in] the entire fall what the [TV] club does on a good Saturday," Mr. Gentry said.

HSN is probably wise to have such modest expectations, industry analysts say.

"Prodigy, CompuServe and America Online have not succeeded in selling goods through the computer," said R. Fulton Macdonald, president of International Business Development Corp., a consultancy.

"The computer is not an easy, convenient way to shop. It's digital, which is positive, but it's not structured at the moment as an entertainment vehicle. When we go shopping, it may be work but it's also supposed to be pleasure."

Even QVC admits the online market has yet to tap its potential.

"There isn't a lot of shopping going on through online services right now, regardless of what anyone says," Mr. Tomlin said.

But the online services are simply seeking a broader array of content to add value to their systems, and in any event they'll get a percentage of whatever sales are generated.

HSN's deal with Prodigy is similar in structure to its deals with cable TV systems, which are paid an estimated 5% of sales from their markets for carrying the channels. Prodigy also will share fees from its bulletin board.

QVC said it's negotiating for a "hybrid" compensation approach that differs from existing models, and will unveil its plans later this month.

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