2. Summary
• Barry Diller, a former chairman of paramount
pictures and fox, Invested $25 million in QVC
Network.
• He believed that, TV-home shopping could
transform television from a passive
entertainment provider into an electronic
resource for shopping, entertainment, and
related consumer services.
• John Malone was an ally who supported Dillers
thinking, a CEO of TCI, own 22% of QVC through
its programming subsidiary, Liberty Media.
3. Summary
• QVC is one of two dominant players in the TV-
home shopping sector of the retailing industry. It
faces three strategic challenges:
– 1) the growth of its core business, especially with a
powerful rival, Home Shopping Network, as the
industry matures and competition increases
– 2) the potential diversification of its core business to
electronic platforms other than TV
– 3) the dependency of its core business on the
evolving cable-TV infrastructure.
• Competitors: catalog one, MTV, retailers, new
entrants
4. QVC had resources to move beyond TV home shopping as markets for such
developed
QVC
5. Strategic Challenges and Case analysis
• How might the core channel offering be
strengthened to establish long-term
competitive advantages in arguably the most
dynamic sector of an already turbulent
retailing industry?
• As the TV-home shopping market matured
and competitors entered, how would
dominant players such as QVC and HSN
maintain market share?
6. Challenges
• How significant a threat to TV-home shopping
was the introduction of new technologies for
electronic shopping involving on-line services,
multimedia PCs with CD-ROM drives, and
touch-screen kiosks? Could demand for
electronic retailing services move away from
TV-based systems? If so, should TV-home
shopping ventures become players across the
new platforms for electronic shopping
delivery?
7. The needs have evolved and customers are more focused on quality information to
purchase a particular product, they demand ease, less time consuming transaction and
lower prices.
8. • TV home shopping in the case has made the physical
location of inventory and the actual site of buying and
selling irrelevant.
• The traditional marketplace interaction between
physical seller and physical buyer has been eliminated.
In fact, everything about this new kind of transaction—
what we call a market space transaction—is different
from what happens in the marketplace:
– The content of the transaction is different: information
about the products replaces the product themselves.
– The context in which the transaction occurs is different: an
electronic, on-screen auction replaces a face-to-face
auction.
– The infrastructure that enables the transaction to occur is
different: computers and communication lines replace
products lots.
9. Reasons why this concept was
adopted
• Consumers cited many reasons for their
displeasure with the marketplace in the case,
including
– lack of adequate parking, poor service,
unresponsive sales help, long lines, and growing
crime rates. The appeal of TV-home shopping, like
catalogs, was the opportunity to avoid these ills.
– At the same time, quality, price, and convenience
were emphasized by consumers as reasons
specifically for TV-home shopping
10. To be successful on a
long term basis,
they have to change
their business plan
from TV home shopping
to online services, they have to incorporate
the idea of a market space replacing the
market place.
11. Physical Market Place Virtual Market Space
• Product Procurement • Online website
– Buying over stock inventories – One click
– Helping manufacturer in – Data base can be formed for future
producing products • Delivery cycle can be improved
• Order processing – by focusing on delivery service
than inventory
– VRUs – All kind of products can be
• Fulfillment displayed
– Delivery cycle • Service
– Only limited products (fashion – Better quality
category) – Reduced prices
• Customer service – Less time consuming
– More specific search
– Memberships
– Flexible
– Toll free lines – More information
14. 1. Things that QVC was doing right:
– Membership incentives
– Host
• Warm, likable, friendly
• Creative while presenting
• Interactive
– Reliable network service
– Presentable studious
• Lighting
• Colorful
• Spacious
– Trying to bring new product offerings to customers
15. 2. QVC was successful be they realized This market-space transaction
the changing market needs, they allows for:
instilled the technological change lower costs
and kept bringing about the Convenience
required changes, introducing ubiquity
better technological solutions. buyers are willing to pay
more because they get a better
selection with greater
convenience.
18. Problems in existing model
• TV-home shopping buyers were excessively
demanding, because "they want exclusive
merchandise, special sizes, quick delivery, and
limited runs of specific items, making it very
expensive to do business with them
• Manufacturers that sold to both traditional
retailers and TV-home shopping companies were
precluded from offering the same product to
both channels because manufacturers could not
afford to threaten their traditional channels of
distribution
19. • Despite grossing nearly $600,000 in the first hour of its
initial show, however, it determined that it could not earn
a satisfactory return unless QVC changed its commission
structure or could find a cheaper way to procure product
• For example, if a retailer purchased a shirt from a
manufacturer for $10 and marked it up 100% (the
traditional percentage) to a $20 retail price, the gross
margin for selling the shirt in a store was $10. With the
same markup, however, the sale on QVC or HSN would
result in $0 margin (selling price $20 minus commission $10
minus cost of shirt $10). Moreover, merchandise returns on
apparel items appeared to be far higher (20% to 28%)24
than for other merchandise groups (18%), presumably due
to size and fit issues.
