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Mergers and Acquisitions Ecommerce Retail

The $2.1bn marriage of America’s home shopping giants is about scale – not Amazon


By Lisa Lacy, n/a

July 7, 2017 | 6 min read

‘You can’t beat Amazon. Just be a good retailer in your space.’

QVC is acquiring HSN, which Forrester says is a logical move in today's retail environment.

QVC is acquiring HSN, which Forrester says is a logical move in today's retail environment.

Digital commerce business – and QVC parent – Liberty Interactive Corporation and HSN, Inc., the $3.5bn interactive multichannel retailer, said they are joining forces in an all-stock deal valued at $2.1bn.

And while there has been some speculation that the acquisition is intended to make the home shopping brands more competitive against the Goliath that is Amazon, Forrester analyst Brendan Witcher said it is actually an example of consolidation in a dynamic retail market, which needs to happen to create scale and efficiency.

“In this fast-moving environment…[brands are] struggling to…find their ways to win, serve and retain customers,” he said. “This is the reason why we see Walmart buy other companies. They’ve purchased [men’s clothing retailer] Bonobos…at HSN and QVC, it’s a matter of leveraging scale. It’s what happens in all industries. Why does one automaker buy another automaker or one airline buy another airline? It happens in retail all the time. It’s a very natural fit.”

And even though Liberty Interactive said it believes the acquisition will increase scale and enhance the competitive position of QVC, Witcher noted defeating Amazon isn’t the primary goal.

“Creating value should be the goal. You can’t beat Amazon. Just be a good retailer in your space. There’s plenty of room to win business in retail, but if you do that, you have to cater to today’s digital consumers who like discovery…a lot of [TJ Maxx and Costco] customers say, ‘I shop with them because of the discovery factor’. So do these two companies. And as consumers become more tuned in to content, the idea of storytelling becomes interesting. They have both of these elements in spades. What we’re looking for is do they have something to capitalize on – which they do – and how [they will] scale – which is what this comes down to.”

Witcher has a point. QVC in particular stresses its personalities, which aid in discovery and storytelling – and build relationships with consumers.

“In any other retailer, you are a product on a shelf or a picture on a website,” QVC said. “QVC provides multiple platforms where our extended family of vendors can tell their unique story and demonstrate the product in a way the customer may not have seen elsewhere.”

Witcher also noted retailers are now as much data-driven as they are instinct-driven.

“It used to be about instinct – now it’s data,” Witcher said. “As you start to understand your customers, you can serve them better…I imagine there is [audience] crossover [with QVC and HSN]…but there’s definitely unique [consumers] that only shop from one. As [the combined retailer gathers] more information, they can serve them better and that’s part of the play as well.”

Those unfamiliar with the home shopping giants may be surprised by their size. To wit: QVC is an $8.7bn business that broadcasts in the US, UK, France, Germany, Italy and Japan, as well as via a joint venture in China, and it reaches 360m homes worldwide. It broadcasts live 24 hours a day and 364 days a year in the US and reaches “a community of affluent, educated women in more than 100m American homes."

For its part, HSN reaches approximately 91m homes – and also broadcasts 364 days a year.

And they’re not just hawking cubic zirconia jewelry anymore either. These networks sell brands like HP, Dooney & Bourke, Perricone MD, Beats by Dre, Fitbit and Vitamix and boast celebrities like Wendy Williams, Queen Latifah, Serena Williams, Rachael Ray and Isaac Mizrahi.

While QVC started off in broadcast in 1986, ecommerce accounted for $4bn of its 2016 revenue. Mobile, too, is an important channel – QVC said it is the #8 mobile retailer globally -- and, like so many brands today, QVC is even livestreaming on YouTube.

HSN, too, has evolved. It got its start selling 112 avocado green electric can openers on local cable access in 1977, but got its own cable channel in 1982 and even rolled out an automated operator named Tootie in 1988 – long before most brands were thinking about chatbots – and it pioneered a Shop By Remote function in 2006.

“The addition of HSN will enhance QVC’s position as the leading global video ecommerce retailer. Every year they together produce over 55,000 hours of shoppable video content and have strong positions on multiple linear channels and OTT platforms,” said Greg Maffei, Liberty Interactive president and chief executive, in a statement.

Mike George, QVC president and chief executive, added: “By creating the leader in discovery-based shopping, we will enhance the customer experience, accelerate innovation, leverage our resources and talents to further strengthen our brands and redeploy savings for innovation and growth. As the prominent global video commerce retailer and North America’s third largest mobile and ecommerce retailer, the combined company will be well-positioned to help shape the next generation of retailing.”

Mergers and Acquisitions Ecommerce Retail

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