Fingerhut Cos., which has quietly built a $1.8 billion mail-order empire, is quickly emerging as a major force in electronic retailing.
The Minneapolis-based company, led by a team of former cable home-shopping veterans, late last month announced "S" The Shopping Network, an upscale cable channel to start this fall.
The company's 2-year-old USA Direct unit has made fitness guru Susan Powter a household name with its "Stop the Insanity!" infomercial. USA Direct expects to sell $125 million in exercise equipment, housewares and other merchandise this year.
Fingerhut also is a partner with MTV Networks in a home-shopping test slated for May on the MTV: Music Television, VH-1 and Nick at Nite channels. Fingerhut will handle fulfillment, telemarketing and merchandising support.
And this month, Fingerhut will announce a similar plan to test home-shopping concepts for Capital Cities/ABC's cable ventures, including Lifetime Television and ESPN.
But "S" is Fingerhut's most ambitious move yet. The channel will target more upscale consumers with big-ticket electronics and housewares, in part to avoid cannibalizing Fingerhut's mail-order sales. The strategy also distances "S" from rivals QVC and Home Shopping Network, which rely heavily on jewelry and small collectibles.
Fingerhut has signed seven-year agreements with Time Warner Cable and Continental Cablevision, which have agreed to distribute the show to 4 million households. Similar long-term deals are being negotiated with other cable systems.
That solves a key challenge for start-up services-available channel capacity-and has led analysts to give "S" a good chance of succeeding.
"This is a good move for them," said Steven Kernkraut an analyst at Bear, Stearns & Co., New York. "They have the marketing skills, they have the database skills, they have the telephone and fulfillment skills."
Fingerhut was founded in 1948 by brothers Manny and William Fingerhut, whose first product was car-seat covers. From that sprang a giant company selling inexpensive housewares, apparel and other merchandise to mostly low-income customers.
"We're keeping our fingers in different arenas," said Fingerhut Chairman-CEO Ted Deikel. "Obviously, we expect electronic media to grow. But our base business is very healthy."
That business still accounts for most of the company's revenues, Mr. Deikel said, and contributed to a record $75.3 million in net earnings last year, a 21.8% gain. A 25 million-name database includes 10 million customers who have bought merchandise in the past two years.
Mr. Deikel and other company executives left Fingerhut in 1983 to run COMB, a close-out merchandiser that formed Cable Value Network in a partnership with cable giant Tele-Communications Inc. Cable Value Network, which used a similar sales strategy to the one planned for "S," was sold to QVC in 1989, and Mr. Deikel returned to Fingerhut with his management team.
Fingerhut executives expect the big-ticket merchandise on "S" to lead to average orders at least twice those of QVC and HSN, which hover in the $40 range. That, they say, will make the venture more profitable for cable systems, which typically earn 5% of sales in exchange for carrying the channels.
"S" will provide a testing ground for infomercial projects at USA Direct, which will now be folded into the "S" operation under the unit's president, Gregory Lerman.
And like other new channels such as QVC's Q2, "S" will avoid the cliched talk-show format employed by traditional home-shopping networks.