QVC already is the Goliath of home shopping. But new CEO Michael George says you ain’t seen nothin’ yet.

By Jack Gordon

One might think that at age 20, home shopping giant QVC has few worlds left to conquer. The channel reaches 160 million households worldwide and shipped 137 million units of product in 2005. Its $6.5 billion in 2005 net sales makes it the second-largest U.S. television network, in revenue terms, trailing only CBS–and 2006 sales are expected to approach $7 billion.

But according to Michael George, the network’s new CEO, QVC is just getting started. As he sees it, “We reach 91 million homes in the United States, and last year we had 7.4 million U.S. customers. That means 84 million customers left to go. There’s no reason why every household in the U.S. shouldn’t buy from QVC.”

The same applies to international markets. Though QVC has a strong presence in the United Kingdom, Germany and Japan, George says, “we’ve barely scratched the surface” of opportunities in those countries, not to mention the rest of the world.

George became president of QVC just over a year ago, in November 2005, lured away from a role as chief marketing officer for Dell Inc. He was named CEO last April. He finds QVC similar to Dell in that both companies “are fundamentally built on a direct-to-consumer business model,” their profitable franchises hinging on the ability to build long-term relationships with loyal, trusting customers. A major difference is that “a typical Dell customer might buy a computer every two or three years. At QVC, our best customers buy 50 to 100 times a year, going back 20 years.”

Mally Roncal sells her Mally Beauty line with a QVC model and QVC host, Patti Reilly.

IT’S ALL ABOUT TRUST
Because maintaining customer relationships is so vital, George sees QVC’s No. 1 challenge as more tactical than strategic. Above all else, the network must continue to get the execution right–and must keep improving. “Every moment we’re on the air is a moment to either re-earn the customer’s trust or lose it,” he says. “Face it, infomercials and home shopping have had trust problems over the years. Our industry was not born in the most attractive light. QVC was founded as an antidote to the carnival-barker mentality…It takes a long time to build a great brand, and not long to lose it if you disappoint a customer.”

QVC’s overriding task, then, is to “do everything we can do at the tactical level to reinforce customer intimacy.” Trust can be damaged in a hundred ways, he says: by putting the wrong product on the air, selling in the wrong manner or with the wrong tone, mishandling a phone call, or failing to deliver a product on time. Taken together, George says, such details add up to “a million executions a day–and we want to take a zero-defects approach.”

How, exactly, does QVC try to build trust on the air? It begins with what the company calls a “backyard fence philosophy.” Whenever a QVC host is presenting a product, George says, “it should feel like talking to a neighbor over the fence, and you’re sharing the discovery of a fabulous product you found. No hard sells. That’s essential to the way we execute.”

In fact, he says, QVC is “fundamentally about the thrill of discovery.” The idea is to portray shopping as an “exciting, fun pastime.” The programming should be “unpredictable,” and should feature “unique products that add real value to people’s lives” at extraordinary prices. “We may not live up to that every day, with every product, but that’s the goal. And I think we do it better than anyone.”

The network’s pricing strategy also is calculated to build trust. “The first price we put on the air is usually the cheapest,” George says. “We very rarely do ‘falling prices.’ So there’s no worry that if you buy it today it will go on sale tomorrow. That’s a real contrast to most of the retailing world.”

He cites quality assurance as a third key trust factor. “We do our own quality assurance on every product, not just our proprietary lines. And we reject more than we accept,” says George.

BUILDING THE BRAND
The challenge, however, is not just to maintain QVC’s dominance in home shopping but to capture those millions of new customers around the globe. George points to four ways by which he means to grow the business.

First, he wants QVC to blow its own horn more often. “We think there’s an opportunity to be louder in the marketplace about who QVC is. You’ll probably see us do more marketing.”

The company’s 17,000 worldwide employees appear eager to help with that effort. Some observers outside QVC say that its corporate culture has loosened up since George’s arrival. The environment at the company’s West Chester, Pa., headquarters is “more fun and open,” one long-time visitor notes. George deflects credit for any such change, insisting that QVC always has been a “high-energy place to work” and that he was struck by the passion of its employees on his first visit to the company.

Supermodel Heidi Klum sells her line of jewelry, the Heidi Klum Collection.

Whether that passion is new or old, however, employees celebrating QVC’s 20th birthday this year certainly got into the spirit of a contest designed, as George puts it, “to help reinforce the brand in the marketplace.” Employees were given “Qforce” t-shirts and asked to “go out and get noticed” wearing them. QVC’s people responded, attracting media attention by means such as parachuting out of airplanes in their t-shirts and staging a “huge” community belly-flop contest in West Chester.

A second priority, George says, is to “continue to differentiate ourselves with product leadership,” in part by expanding QVC’s selection of prestige brands. As examples, he cites the recent additions of a “Diva by Dana Buchman” line of women’s clothing and another line of shoes, handbags and accessories by designer Michael Kors.

A third growth strategy is to add more “destination programming” designed to pull non-regular viewers to the network. During one two-week period in October, for instance, QVC aired programs featuring Barry Manilow, the band Alabama and Elton John, all selling their own CDs. Manilow sold 43,000 units in an hour, a home shopping record.

QVC uses celebrity hosts carefully, George says, “not as hired guns, but only when they are meaningfully involved with the product,” as when musicians sell their own CDs. On occasions when the planets align, this can produce destination programming that also serves the product-leadership goal. For instance, QVC recently added a line of jewelry designed by supermodel Heidi Klum. Thanks to the timely success of her “Project Runway” TV series, Klum attracts destination viewers, as well as those looking for distinctive trinkets. “American Idol’s” Paula Abdul, whose jewelry line was added earlier in 2006, functions the same way.

Underlying the other growth strategies is QVC’s refusal to accept a role as a niche marketer. The network does not aim its products or programs at any particular, narrow demographic. “We don’t think there’s any such thing as a ‘typical’ home-shopping customer,” George says. “Our philosophy has always been that we want to appeal to everyone from age 20 up. We don’t target children but, otherwise, whatever your demographics or psychographics, you should find something on QVC to be excited by. [We believe that] if you put on QVC in the background, you’ll eventually buy from us. You’ll find some product that blows you away–something you have to have–regardless of your age, color, income, tastes, and so on.”

In other words, if you are over 20 and QVC can reach you anywhere in the world, the network regards you as a viable customer who simply hasn’t found the right product yet. And it tries to program accordingly.

Quality programming is key to QVC’s success. Shows feature unique products that add value to people’s lives.

NEW MEDIA
Technology has greatly altered the media landscape, and the pace of change will accelerate. George says, “Which is all to the good, as far as we’re concerned. We can only benefit from the rise of new media.”

QVC’s website already represents “one of the largest e-commerce businesses on the planet,” he says. The site will be “north of $1 billion in revenue this year, and we’ve just scratched the surface.”

As video becomes a more ubiquitous feature on the web due to increasing broadband penetration, “we’re uniquely positioned to take advantage,” George says. “Whether it’s video segments filmed strictly for the Internet, or [video] demonstrations on the website, or archiving our [TV] shows for video on demand, that’s a huge opportunity for us.”

Mobile e-commerce also shows promise. Though the benefits are a few years away in most of the world, George says that 6 percent of QVC’s Japanese revenue already comes from consumers who access its website and its live shows via cell phones and other mobile devices.

George sees great things ahead for interactive television (iTV), but not necessarily because of the potential for viewers to buy products directly with the TV’s remote control device. “I wouldn’t describe the ‘buy button’ on a TV remote as a revolution by itself,” he says. George contends that motivated buyers with mobile phones already can speed dial to a menu that prompts them through the buying process in 60 seconds. That’s pretty quick and easy, so while buying with the remote will be a convenient feature, “it maybe won’t be a huge deal to consumers.”

The greater promise of iTV, George says, lies in the potential for viewers to use the remote to access earlier QVC shows, or navigate to a “hidden channel” to see the show that aired an hour prior, or to choose among similar options as yet unforeseen.

The company’s in-house name for new-media planning is QVC Everywhere. “We want to go wherever there are eyeballs,” George says. “We want to leverage new technologies whenever consumers are ready for them. Over the next several years, we’ll redefine what home shopping is all about.”

Jack Gordon is editor at large for Electronic Retailer magazine. We would appreciate your feedback. To submit comments, please e-mail the magazine at editors@retailing.org.