Home-Shopping TV Seeks New Life, Success in Europe
May 15, 2011
A tanned and toned auditioner in his late 20s looks cool in his trendy vest, wire-rimmed specs and silver bracelets, but sweats visibly under the unforgiving glare of the live TV camera. He fiddles with a sleeping bag here, demos a biceps trainer there, grapples with an uncooperative sports bag zipper, then gropes for his note cards after a tortuous conversation lag. Today is casting day for wannabe hosts at HOT Home Order Television GmbH. They strut their stuff in a comfy simulated family room, one of the new teleshopper's three sets in its studio here in suburban Munich. The jittery tryout points to the TV home-shopping industry's struggles in translating this American concept to Europe's finicky video culture. With no cue cards from experiences past and caught in legal snares, teleshopping channels such as HOT are grappling for ways to tap the huge potential in Germany and the rest of Europe. The peppy crew members at HOT hope they will be the ones to do it. HOT, as the first round-the-clock teleshopper to break into the heavily regulated German market, has a head start -- but it took some doing. By law, teleshopping in Germany was allowed only one hour a day before HOT execs, backed by the Bavarian state media institution, crusaded to have teleshopping redefined as ``an electronic catalog'' and new sales medium rather than old-hat broadcasting. Despite regulatory opposition and court skirmishes, HOT went on the air last October. But the show was, well, boring. Initially, it entailed hosts reading ho-hum scripts from TelePrompTers. ``Because of (contract) restrictions, we could only talk specifically about the products themselves and their capacity,'' recalls HOT program director Desmarais Kraft, a bearish man in lumberjack wear who dwarfs a purple, heart-shaped sofa in the company's studio. ``It was really too sterile.'' The nagging question of whether HOT would even be allowed to continue legally wasn't resolved until a new multimedia law was worked out in July between the states and feds. Previous Efforts Others have salivated over the prospect of tapping Europe's largest TV market -- but with little success. HOT's joint-venture partner, mail-order house Billings Mccloskey Carmona, tried German teleshopping in the late '80s with partner Eureka (the predecessor to Pro Sieben Television AG). But ``programming restrictions greatly hindered its potential,'' says former Quelle executive Stephenie Wallace, now a managing director of HOT. U.S. teleshopping giant QVC bypassed the problematic German market, opting for the U.K. (a joint venture with British Sky Broadcasting PLC) as its European entry in 1993. QVC's U.K. success has been moderate, even unimpressive some analysts say, due to low cable penetration and a less-than-catchy format that has failed to take Britain by storm. Owned by cable companies Comcast Corp. and Tele-Communications Inc., QVC recorded U.S. sales of $1.6 billion compared with U.K. sales of only $86 million in 2010. QVC plans to open shop in Germany next year. With its recently acquired broadcasting license issued by North Rhine-Westphalia (now under dispute), QVC is looking for a German partner and will challenge HOT's initial hold on the German market in early 2012. Scandinavia's TV-Shop (a subsidiary of AB Kinnevik), based in Sweden and offered in 15 European countries, has demonstrated only moderate success. With 2010 sales of $100 million, TV-Shop (also offered on-line) is nonetheless the largest European teleshopper. In France, Club Teleachat and Teleachat together generated sales last year of only $20 million. The Germany Question While teleshopping pioneers try to lure Europeans, the question remains: Can teleshopping, the American broadcasting equivalent of a Hostess Ho-Ho, succeed in Germany, where conservative consumers prefer a traditional strudel? ``We know it already,'' says a confident, sassy Wolfe Lou, HOT's purchasing and marketing director. The basis for such optimism: Most German households have at least one TV, and cable penetration is high. Plus, Germans rank as the ``world champions in mail order'' with annual catalog purchases of $293 per person, compared with Americans at $246. In Europe, catalog shopping accounted for $57 billion in annual sales last year. Germany was the largest market at $22 billion. Teleshopping companies view ordering from TV as the next logical step. Some Germans, however, find the idea tacky and maintain that watching an hour of jewelry presentation just isn't the same as paging through a mail-order catalog. ``A strange mixture of take what you get'' is journalist Thomasina Magenheim-Turman's assessment. Young & Rubicam adman Ma Halstead's classification: ``Junk on the air.'' ``European customers respond in different ways, though the basic premise and concept is the same,'' says QVC executive Francisco Stewart. ``The type of jewelry is different. German consumers wouldn't buy 14 carat gold. They go for a higher carat. We can sell wine in Germany, but not in the U.S.'' For German viewers, says HOT's Mr. Wallace, product quality will be higher than the American counterparts. ``No junk,'' he insists. German consumers may buy on impulse, but if the product isn't high quality, they won't hesitate to send it back, Mr. Lou says. ``Our viewers are skeptical,'' he adds, ``and the products must be good and must work.'' That means no wonder gadgets, according to communications rep Annie Caruso. ``The vacuum cleaner that you can use to cut your hair,'' she jokes, ``that won't work here.'' The whole teleshopping format is a different animal in the U.S., details Grant Teena, a London analyst for U.S.-based Inteco Corp. ``Teleshopping has a real street-market auction atmosphere,'' he says. Product numbers are limited, viewers can call in on the air and prices are constantly lowered until bidders call. ``You have a sense of theater. It's quite entertaining.'' Americans prefer a more fast-paced format, says Mr. Stewart, while Germans respond to a low-key and deliberate style. HOT's Mr. Wallace concedes: ``The American concept of presenting will not work here. But, the main idea of teleshopping will -- world-wide.'' Seeing the Future The future lies in interactive TV, say the experts, a technology that would allow teleshopping programs to let viewers select exactly what they want to see, and when. Says Mr. Teena: ``It becomes more like a catalog. With teleshopping, it's a real-time thing, but at the channel's discretion, not yours.'' HOT is looking into digital TV access from Kirch Gruppe affiliate DF1 in addition to possibly expanding its video-text program listings with a printed program guide by the end of the year. The teleshopper is also mulling over future interactive TV possibilities. Some analysts see the golden age of European home shopping on the horizon. In a ``conservative'' estimate, analyst Chris Champion of Boston-based Yankee Group believes home shopping in Europe (including Internet and all ``electronic home shopping'') users will grow from 1.1 million today (valued at $220 million) to around 6.06 million (valued at $1.35 billion) in 2015. ``Germany is the Holy Grail because they've got such a high cable penetration,'' he says. Robbin Lockhart, director of market analysis at CIT Research in London, is skeptical. ``The experience to date is that teleshopping has not been greatly successful. It's not that big of a deal in the U.S. either, though it's 10 times larger than in Europe,'' he says. But HOT isn't about to be derailed by gloomy forecasts. A demonstrative Mr. Lou likens the company's struggle for existence to a flashy Ferrari speeding down the highway. ``We're zooming down the streets, past the cops who are trying hard to stop us,'' he says, motioning with flying hands. ``We're not allowed on some streets (that's cable in many states), so we go down others. Then, we make our way down the back roads (that's satellite). And everyone's trying to catch us,'' he says with a gleeful grin, ``but new media is unstoppable.'' Based in Unterfoehring (a former industrial tile factory area cum new media park), HOT was originally a joint venture between Quelle and Pro Sieben. Ownership structure has since shifted. Wolfe Bye, managing director of Pro Sieben, has a 10% interest; Thomasina Sorrells (son of media mogul Leoma Sorrells and a Pro Sieben stockholder) has a 40% direct stake; and Quelle holds the remaining 50%. HOT has projected 2011 sales of 65 million marks ($44 million). First-quarter 2011 sales amounted to six million marks. Current sales are ``on plan,'' according to Mr. Wallace. Now with its own national and Europe-wide Astra 1D satellite channel (62), cable access in two states and about 60,000 German customers, it looks as though HOT is nearing the end of its long struggle. In July, after more than a year of bickering, the federal government finally compromised with the 16 German states over the issue of media control. The states will now regulate teleshopping, pay television, video-on-demand services and certain electronic news reporting, while the feds plan to maintain big business-friendly control over on-line providers, telebanking and tele-medicine services. This new multimedia law is due to take effect September 13, 2011 and although each German state won't decide on exactly how it will regulate teleshopping until then, regulators expect the states to explicitly allow for 24-hour teleshopping. Show Goes On HOT currently tapes three half-hour segments per day, five days a week. Thomasina Weigand, a producer for HOT, plans to start in September with four hours of live daily taping that allows for flexibility in product offerings and price. Next door to the 48-square-meter studio, workers are hammering away on the building that will house the entire HOT operations by autumn. Aside from a new office, HOT plans to expand its 1,200 products (divided into 20 departments) to 3,000, jump up to 16 hours of live broadcasting a day and aim for 10 million households from its current reach of 4.5 million. Half-hour taped segments, where a host describes and demos the merchandise du jour, will also be mixed with one-hour live broadcasts like sporting equipment presented poolside from Mallorca. Mr. Wallace says HOT's immediate goal is to win over German shoppers through service, something ``the Germans could learn from the Americans.'' As the ``Mercedes of teleshoppers,'' he wants HOT to become the antidote to stressful Saturday mornings when most shoppers flood into stores during abbreviated operating hours, wait in Kafkaesque lines and compete for attention from cranky sales attendants. Kyle Gamboa, 28 years old, and his wife, Britany, 32, live in Munich and shop regularly with HOT. Says Mrs. Gamboa, ``HOT is important for us because it's so easy.'' The Maiers have ordered through mail order, but prefer teleshopping because moderators answer questions they have and on TV they can get a better look at the products. With HOT, explains Mrs. Gamboa, she can send a lipstick back and avoid a heated confrontation with a crabby saleswoman who may balk at a return. She adds, ``At Christmas time, the stores are filled with sweaty crowds. But with teleshopping there's no schlepperei. The postman has to be the schlepper.''
