ShopNBC CEO Will Lansing doesn’t care if customers buy from television or a direct-mail piece. And as far as he’s concerned, Internet video isn’t competition-it’s a gift.

By Jack Gordon

As broadband Internet service extends its reach into U.S. households, video becomes an increasingly common feature on websites, and the distinctions between computers and television sets get hazier. Oceans of ink have been spilled in arguments over the implications of the so-called convergence of television and the Internet. What will it mean for the television industry in general and for, say, TV home shopping networks in particular?

As far as Will Lansing, president and CEO of ValueVision Media-which owns home shopping network ShopNBC-is concerned, the verdicts are in. He points out that people now pay thousands of dollars for giant, high-definition plasma screens. That has nothing to do with Googling and everything to do with televised NFL football games. As for home shopping, Lansing regards the growth of video on the Internet as the best thing that could happen to his business. And he says he isn’t alone in that perception.

“Five years ago, investors looked at Internet video and wondered if TV home shopping was doomed,” Lansing says. “Now they’re realizing that [the home shopping model] is the wave of e-commerce in the future.”

His chain of reasoning begins with the rapid proliferation of broadband households. Broadband subscriptions grew by more than 20 percent in the United States in 2006 alone. According to market research firm Parks Associates of Dallas, 50 million U.S. households had “fat pipes” as of December, and the number will grow to 60 million by the end of 2007. That would represent 55 percent of all U.S. households. Other research says that among “active Internet users,” broadband penetration already stands above 73 percent.

Fatter pipes mean more video on the Internet. From an e-commerce perspective, Lansing argues, that will translate into online shoppers who not only want, but expect to see video demonstrations of products, rather than just still photos and text descriptions. Who has the experience, the expertise and the production facilities needed to create video demos in a compelling and effective way? ShopNBC does, Lansing answers. So do its larger competitors, QVC and HSN. And, he adds, so do infomercial producers.

“Think about what happened in the late ’90s, when e-commerce was getting started,” Lansing says. “Retailers went to boutique shops for help developing their websites. They needed people who could work with HTML, and so on. Well, that’s simple compared with the skills needed to do video effectively-and those skills are in relatively short supply.”

If the next generation of e-commerce will be built on video-and it will, Lansing says-then the TV shopping networks are ideally positioned to lead the charge. He points out that ShopNBC has a half-dozen studios, 23 veteran hosts and crews of experienced producers, directors, set designers, lighting experts and camera operators-all specialists in creating compelling video that is designed for one reason: to sell products.

While QVC and HSN are in the same enviable position, Lansing argues that ShopNBC has been quickest to spot the Internet as its best growth opportunity. “We lead our industry in Internet business as a percentage of total revenue,” he says. More than 25 percent of the network’s sales now come from its website, ShopNBC.com, and the growth rate for the Internet business is above 30 percent per year. More than 1,000 of the products featured on ShopNBC.com (about 15 percent of all products offered on the site) already have video clips attached, and the number is climbing fast.

Lansing maintains that ShopNBC has another advantage over its larger rivals, as it faces a changing media landscape. This has to do with a mindset, and it helps to explain why Lansing isn’t bothered by the notion of consumers who would rather buy from the Internet-or from catalogs, for that matter-than from television. “We don’t think of ourselves as a TV home shopping business,” he says. “We think of ourselves as a direct-to-consumer retailing business.”

That self-image has some profound implications.

ANALOG TO DIGITAL
With 2006 revenues of $767.3 million, ShopNBC is dwarfed by $3 billion HSN and $7 billion QVC. Lansing puts a positive spin on his competitive position, referring to ShopNBC as the “upscale, fast-growing” network. Still best known as a jewelry retailer despite having expanded into additional product lines, ShopNBC’s average selling price of $200 is four or five times higher than the competition’s, he says. And revenue has seen double-digit growth rates for the past five years.

But one more major characteristic distinguishes ShopNBC from its competitors, Lansing says: “We’re very focused on direct marketing. We look for multiple ways to maintain our relationship with customers after a transaction.”

He suggests that being the No. 3 home shopping network actually has played to ShopNBC’s advantage as the cable-television world transitions from the analog format to digital and the number of available TV channels reaches into the hundreds. “In the old days,” he explains, “TV home shopping was one of 30 to 50 channels. We all relied heavily on channel surfers as customers and repeat customers. A lot of additional marketing wasn’t necessary. But as the No. 3 network, we didn’t have the channel positioning that the other guys had. So we grew up in a world where we had to try harder and focus on other marketing approaches that let us connect with customers.”

Those other approaches include direct mail, e-mail offers, catalogs, postcards and newsletters-not to mention the website-all designed to “build a relationship with customers and call attention to things we think would interest them.” For instance, if the customer database reveals that Sally in Chicago likes a particular jewelry designer, Sally is likely to receive an e-mail telling her that the designer will appear on ShopNBC on the 12th of next month. Sally also might get a postcard with a direct-response offer for the designer’s jewelry.

As a television network, ShopNBC now reaches 67 million U.S. households, and TV distribution continues to expand, Lansing says. But by establishing itself as a multichannel retailer, the network is better able to maintain relationships with digital customers who are less likely to chance upon it while surfing among 200 channels-or with customers who lose the network altogether. This occurred last year in ShopNBC’s own home base in the southwest suburbs of Minneapolis, when Comcast took over the local cable contract from Time Warner and converted ShopNBC to a digital-only channel, meaning that customers with analog service no longer receive it.

Though Lansing says this doesn’t represent an overall national trend (ShopNBC is adding both analog and digital households), it’s the kind of thing that can happen as the digital conversion progresses. When it does, it is a great advantage to have other marketing channels in place.

WHO CARES HOW THEY BUY?
Multichannel marketing was nothing new to Lansing when he took over as head of ValueVision Media in December 2003. He had served as CEO of Fingerhut Companies, at the time the nation’s second largest catalog retailer. When Fingerhut was acquired by Federated Department Stores, Lansing became chairman of Federated Direct, overseeing Macys-by-Mail and Macys.com. His background also includes stints as CEO of NBC Internet and COO of Prodigy Inc., where he launched the company’s flagship Prodigy Internet offering.

Small wonder, then, that Lansing was inclined to see ShopNBC not just as a television network but as the foundation of a multifaceted direct-sales operation. “Consumers don’t utilize only one channel,” he says. “They go to brick-and-mortar stores, they go to television, the Internet and catalogs. We run all of our channels together with a single customer database. And we think a lot about how-and how often-we talk to our customers.”

Lansing wants ShopNBC to be format-neutral-not to care which channel consumers choose to buy from, and not even to see its customers as falling into particular preference categories. For instance, he says, “We don’t think of [TV buyers and Internet buyers] as two different groups of consumers. The same people see us sometimes on TV and sometimes on the Internet. The Internet is our main growth channel now, but we have a lot of cross-channel customers.”

Distinctions between television, catalogs and the Internet are important from technical and operational standpoints, but they are irrelevant to the force that really drives the business, Lansing says. That force is pretty basic: “We have to put our energy into finding upscale products at compelling values. Then we have to find ways to tell people what a great value it is. That’s what we’re really about. That’s who we’ve been and who we’ll always be.”

The same philosophy applies to newly emerging technologies that offer additional ways to reach customers. “We’ll continue to explore channels as they become available,” Lansing says. “Near term, it’s about TV and the Internet. Long term, it might be cell phones, PDAs and podcasting. There’s no shortage of platforms for e-commerce to happen on. But, our customers will take us to [new media]-we won’t take them. When it’s something the customer wants, we’ll be there.”

Jack Gordon is editor at large for Electronic Retailer magazine. Want to read more about home shopping? Visit “archives” at www.electronicretailermag.com.