Sofa so good for home shopping

Crook-locks, porcelain dolls, bracelets and model cars are all up for grabs on the UK’s only 24-hour dedicated shopping channel, QVC. TV shopping has grown rapidly in the UK over the past three years, and there are now eight channels offering home shopping.

But since QVC opened up shop in October 1993, it has yet to bring in much in the way of profit. In its first year of operation it lost 23m. Now the company is just about breaking even. It attributes this to the high start-up costs, and the investment needed in warehousing and distribution. This year, for example, QVC is ploughing 14m into a new warehouse and telephone call centre in Liverpool.

But its sales are on the increase. Turnover in 1995 rose to 37.2m from 16.8m in 1994, and the station claims to have 400,000 regular customers.

The cornerstone of QVC’s sales are so-called “Today’s Special Value” (TSV) products. Each day at midnight, a product is offered at a substantially reduced price, but only in a limited quantity.

This would account for a substantial number of the late-night viewers the channel has. Altogether TSV products account for 30 per cent of total revenues.

The TSV product is usually presented by one of the channel’s six presenters and a guest celebrity. They talk up the product, continually emphasising the limited availability of the offer. The presentations are sometimes interrupted by “T-calls” – unprompted testimonials from viewers. The product itself may be offered again at a later date, but never at the same low price. Other promotional product classifications include introductory promotions (IPs) and power promotions (PPs). The company is rarely left with unsold stock because most of the items it offers are bought on a sale or return basis.

Other channels operating in the UK include Quantum (screened through NBC Super Channel), and Regal. International Shopping Network (ISN) has been operating since September 1993, but is broadcasting only three hours a day, through the South-Western Bell cable system.

So far, access to TV shopping channels has been restricted to those homes with satellite or cable TV, making it a rather small market in terms of coverage. Over the next couple of years, however, its reach will increase as the cable and satellite market grows.

The main strength of these TV shopping channels is that they are able to offer prices competitive to the high street, mainly because there are fewer costs involved compared with conventional retailing operations.

Multimedia techniques mean that the station can make a lively presentation of the products and explain any technical features much more easily than with conventional retail methods. Crucially, the company is able to get instant feedback from its customers on issues such as quality and pricing. The live aspect of the presentations means that a theatrical atmosphere can be created, often with the help of celebrity guests, and up-to-date information can be given on the availability of a product, creating further buying excitement.

In a European context the UK has potential to grow, especially in the cable area, where it has a considerably lower penetration rate than the leading three European countries, Germany, Sweden and the Netherlands.

The European Union has sought to curb the commercial aspect of TV through the Trans-frontier Television Directive (1991), by introducing a one hour per day time limit for advertising. The Independent Television Commission (ITC), however, classified TV shopping channels as retailers and has been able to issue licences for them to operate.

On the minus side, the cost of production – broadcasting – can be considerable, as a dedicated studio and production crew is required almost round the clock because the station broadcasts live 17 hours a day. Taking orders through the telephone system can also present a significant expense because it usually requires the use of leased lines.

But when QVC launched in the UK there were many who doubted whether it would catch on. While there is little evidence of massive profits to be made from this type of retailing, there are signs that there is a sizeable core of consumers willing to shop from the comfort of their own couch.