Chairman Barry Diller of QVC Networks Inc. was confident and expansive the other day as his company agreed to acquire rival Home Shopping Network. "I think we will end up with a competitive powerhouse in the broader retailing industry," he told reporters.
And investors agreed with him. In two days, they added $7 a share, or 11%, to QVC's already high stock price and bid up Home Shopping Network by a couple of dollars too. The belief is that home shopping will turn into a giant business, displacing department stores and emptying malls.
Yet even as video fever grows, traditional retailers such as May Department Stores, Dayton Hudson and Carter Hawley Hale are spending briskly to expand their retail space and refurbish existing stores. And investors are bidding up their stocks too--although not to the stratospheric levels of QVC Networks.
What's going on? The retailing business is entering a new era, in which home shopping in all its forms increasingly will compete with traditional stores and malls. The competitive edge in this new horse race will be less a matter of fashion than information.
The contest looks unequal today--crude costume jewelry sold on TV compared to splendors of the world sold in fashion malls. And to be sure, it would be unwise to count out traditional retailers, especially if they're smart enough to change with the times.
But over time, watch for the electronic emporium to become more of a challenge for the store, because retailing today, like so many other businesses, is being driven by efficiency and information. Consumers want more information because they want to spend less time shopping.
The trend is well established. Customers have been spending less time in stores, reports Stillerman & Jones, an Indianapolis retail consultancy--72 minutes on an average visit compared to 90 minutes a decade ago. They are making fewer trips to the mall and visiting fewer stores, but are spending more each time they do go shopping.
In a word, they are making their shopping more efficient. And they're demanding that stores help them to be efficient, says Jody Martin, a vice president at Stillerman & Jones. That means "convenient layouts for merchandise, lots of information for customers and quick checkout."
Old notions about shopping are being redefined. "People don't shop to entertain themselves," Forbes magazine said in a recent cover story. "They shop for information--about prices, colors, features."
Therefore, May, Dayton, Carter Hawley and also Kmart, J.C. Penney and other chains are right to spend on refurbishing their stores. They must be up-to-date because they have fewer chances at each customer and more competition all the time.
For there's no doubt television shopping is attracting customers. Diller's QVC and Home Shopping Network, in existence less than a decade, had combined sales of more than $2 billion last year. Diller's operation is growing almost 20% a year.
The former film executive's boast that QVC will become a competitive powerhouse in the broader retailing industry--a business of almost $800 billion in shopping center sales--may look ambitious.
"It will be a supplement for going to the store, not a substitute," says analyst Monroe Greenstein of the Lazard Freres investment firm, reflecting a view of QVC as a video catalogue supplier of home furnishings, jewelry and decorative items.
But Diller is moving into apparel, the heart of the department stores' business, in a particularly shrewd way. The fashions sold on QVC typically appeal to older, larger-sized customers who may not look upon a trip to the mall as a pleasurable experience. This way they can shop anonymously.
One catch is that apparel is a risky business for home shopping. All customers, women and men alike, want to try on clothing to see how it fits, how it looks.
Customers trying and returning garments have proved costly for catalogue companies, including Sears, which closed its catalogue operation last year. The problem was one of information--the catalogue's picture and text didn't tell customers as much about the garment as trying it on would have.
But Diller knows that television improves information by giving a better picture and that, over time, technology will improve that picture by making it three-dimensional and interactive.
Meanwhile, QVC asks its customers not only for their sizes but for any peculiarities of fit--a sloping shoulder, a bulge here or there. All that information goes into the QVC database--an invaluable asset in today's retailing business.
That's why QVC's stock price--at roughly 40 times last year's earnings--is so high. Investors are impressed not so much by fashion as by Diller's understanding of the competitive role of information.
No Time for Bargain Hunting?
As shoopers have spent marginally less time in the mall in recent years, their expenditures per shopping trip has gone up steadily--even in the 1991-92 recession.
Source: Stillerman, Jones & Co.