HOME SHOPPING MASTER QVC STRUTS ITS STUFF ONLINE, TOO

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Don't go to iQVC, the online arm of TV home shopping channel QVC, expecting the best prices.

You won't get the best shopping experience, either: The site is clunky and difficult to navigate. Though there are 80,000 pieces of merchandise for sale, from computers to grills to diamonds, you would hardly know it.

So how exactly did QVC become one of the Internet's most popular and top-selling retailers?

The 3-year-old QVC.com site is the most-visited general retailer on the Internet, and consistently ranks among the top 10 or 15 shopping sites overall in traffic, according to Nielsen/NetRatings. IQVC, the QVC unit that manages Internet operations, reported $44 million in net sales last year, a figure that's expected to at least double this year.

And unlike most of its online competition, QVC.com has been profitable since its third month of operation.

Sure, we've all laughed at QVC's low-brow shows hawking costume jewelry or Kansas City steaks. But just as this West Chester, Pa.-based company has turned itself into a $2.4 billion (net sales) TV retailing powerhouse, it's building an equally powerful online operation.

"We're a broadcast company. We also know how to sell online. There are not a lot of companies we can name that combine that," said Steve Hamlin, VP of iQVC.

When iQVC launched its site in September 1996, retailing on the Internet was but a glimmer in the eyes of a few savvy salesmen.

SALES COULD HIT $100 MIL

IQVC racked up $15 million in net sales in 1997 and soared to $44 million in 1998, recording some 35% of its annual sales in November and December alone. Though Mr. Hamlin won't divulge his 1999 sales prediction, its sales could top $100 million this year if iQVC is growing as fast as other online retailers.

Much of iQVC's success comes from its tie-in with the QVC shopping channel. Seventy-nine percent of iQVC customers have also purchased on QVC, Mr. Hamlin said.

Both properties share juicy demographics: Seventy percent of its online visitors and 80% of TV viewers are female; 53% of QVC TV viewers own a computer and 41% have Internet access.

The URL appears on the TV screen throughout the day, and the site gets up to 10 minutes a day of commercial time on the network. On the back end, the tie-ins become even more important: the 32-person iQVC unit reports directly to the chief information officer of QVC and shares a product inventory database with the TV network.

MORE INTEGRATION

IQVC also manages a "virtual warehouse," an electronically linked network of 300 manufacturers, distributors and fulfillment houses.

Ask Mr. Hamlin if he thinks iQVC could ever be spun off, and he's firm in his answer: "There's nothing to prevent us from spinning off, but it doesn't make sense unless you're after the money."

Instead, he speaks of integrating iQVC even more tightly with the network. A redesign, handled by Sapient, New York, scheduled to launch next month, will make the site easier to navigate.

QUALITY, VALUE, CONVENIENCE

Shopping on QVC.com will never be a bargain, a fact Mr. Hamlin freely admits. On a recent day, iQVC was selling a Palm V organizer for $446.71, more than $100 above what competitors Buy.com and NECX were charging online.

"Is that [heavy discounting] a sustainable business model and will that bring brand loyalty?" Mr. Hamlin asked. "QVC stands for quality, value and convenience. What customers are looking for is trust."

Online shoppers would seem to agree: A recent Harris Interactive poll gave iQVC top marks in customer satisfaction in four product categories: clothing, electronics, health/beauty and toys.

What could slow the iQVC steamroller? Its biggest competition is other merchandisers that are coming around to the Internet.

Wal-Mart Stores, Sears, Roebuck & Co. and Dayton Hudson Corp.'s Target will relaunch their retail sites this fall, while Nordstrom will roll out a major presence in time for the holidays. Federated Department Stores, meanwhile, is amassing a formidable online team that includes Macys.com and Fingerhut.

IQVC also faces internal challenges. Its ambitious online shopping mall concept, dubbed the Square, is a year overdue, and the man who conceived it, former General Manager Stuart Spiegel, departed in June for Inktomi.

The Square is a venue that will allow visitors to the iQVC site to simultaneously shop at other online merchants and pay for all the merchandise on one bill.

As originally conceived by Mr. Spiegel, the Square was to have launched last fall with a host of partners. Mr. Hamlin now says the Square concept will emerge as a "test" this fall with two or three partners that have yet to be signed.

It's a tall order, but if Mr. Hamlin and the iQVC team can make the Square a success, QVC could once again redefine retailing, this time on the Internet.

Contributing Editor Debra Aho Williamson writes the monthly Inside the Web report. Send any Internet case study ideas to debbie@milestone2.com or Editor

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