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Qurate Retail Thinks it Should Get More Love From Investors

Qurate Retail Inc. doesn’t think investors give it the attention it deserves.

Qurate is the home of the QVC and HSN shopping brands, which still does $14.1 billion in annual volume despite performance challenges at its U.S. operations. Company president and CEO Michael A. George, speaking at the company’s Investor Day presentation last month in Manhattan, acknowledged how investors are “wary” about the business over the longer term, particularly since Qurate’s formation about 18 months ago after it completed a merger with HSNi.

George told investors that there’s “long-term potential for the QVC and HSN businesses,” noting its relevance for today’s retail landscape.

“The shopping experience is more relevant than ever,” he said, citing the platforms’ immersive video-rich experiences and curated discoveries, as well as its ability to aggregate live audiences and the intense social engagement between the company’s brands, influencers and platform users.

And while investors might be concerned that the business is in decline, George sought to allay those fears. Qurate’s point of differentiation is focused on how digital commerce is different from e-commerce that’s transaction-based.

Sales on the QVC/HSN platform are based on discovery, where the “experience is about engagement, not transaction,” he said. It’s an experience that still incorporates the model’s sense of urgency and limited time availability, but is less about searches online for a product or item, which in turn focuses more on transaction speed and efficiency. And according to George, Qurate’s model is based on a group of “super users” who keep returning to buy more, as opposed to a broader customer base that might buy an item or two sporadically.

The super user is a shopper who is “highly engaged in our platform,” George said.

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And the category mix evolves organically, depending on how customers respond to products. On average, between 370 to 460 brands are available, with 2,000 to 2,700 items aired per month. Any individual item is broadcast on average between 1.6 times to 1.7 times per month. About 30 to 60 new items are aired each day, with 20 to 30 new brands shown on air per month and 70 to 80 new brands per month available off air across the QVC and HSN properties.

George said new customer acquisition is re-accelerating, up 4 percent for QVC’s U.S. business for the 12 months ended September 2019 and up 7 percent at HSN for the same period. Even better, “new customers are trending younger,” George said. Across both platforms, millennials between 22 and 38 years old were up 53 percent for the 12 months ended September 2019 and the Gen X cohort, those between ages 39 to 54, grew 141 percent in the same period.

QVC’s best customers in the U.S., those making 20 or more purchases in the past 12 months and representing 17 percent of all customers, bought a total of 70 items average during the period, spending $3,500 total on average. They made 33 web visits per month, had 18 days tuning into AVC TV per month, and represent a 99 percent retention rate for the business.

George told investors that the company has had short-term integration pressures connected to the two businesses, and cited declining linear TV viewership, intense price competition and shorter and more volatile product lifecyles as headwinds. But there are also some tailwinds, and they include what he calls the “rapid growth of digital media” and the growing importance of authentic storytelling and immersive experiences.

The goal is to bring in 30,000 or so new customers, and the company knows it has to win with special products at compelling prices, the CEO said. The latter translates to a merchandising team scouring the world for unique products and entrepreneurs. While leading national brands are important, the company also wants differentiation, like being the first to launch a product or first with a unique bundled assortment.

“We don’t want what’s in Macy’s,” George said.

And with many consumers cutting the cord on cable, the company is looking at other distribution platforms, whether that’s subscription or free streaming services or new broadcast innovations, such as augmented reality in Italy. Users in Japan, Germany and the U.K. use QR codes and their phones for an onscreen scan that “transports them to a different universe,” George explained, adding that the process is about “doing for e-commerce what we’ve done for traditional live TV. A lot is blocking and tackling.”

Qurate said last month that its third quarter loss was $770 million, against net income of $72 million in the year-ago period. Total revenues fell 4 percent to $3.09 billion from $3.23 billion. By division, the QVC/HSN business saw a 4 percent slip in revenues to $1.85 billion. QVC international revenue rose 2 percent to $650 million. Revenue at the Zulily business fell 17 percent to $359 million, while the Cornerstone division–Grandin Road, Frontgate and Ballard Designs businesses–saw a 2 percent decrease to $226 million.