Liberty Interactive Corp.’s (TSX:QVCAC) QVC Inc. is beginning to see reason for some concern with its “impulse” driven business model. For years QVC has relied on its target demographic to tune in and, as QVC says, “Discover things they didn’t know they wanted.”
Sales fell 6% in Q3 representing the first drop in 7 years. Weak sales have put pressure Liberty’s shares which lost a quarter of their value last year.
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Not A Normal E-Retailer
QVC’s ace in the hole has long been the fact it isn’t a normal online retailer like Amazon.com Inc. (NASDAQ:AMZNC) and others. QVC counts on its customers watching demonstrations of both new and familiar products and buying on impulse.
QVC is not a place people go to research or look for specific items - at least not to the extent they do on Amazon.com. QVC’s demographic is women (87%), homeowners (88%) and between the ages of 35 and 64.
Dealing With Cord CuttersSince QVC is mostly seen on cable TV, the growth of cord-cutters and cord-nevers could be a problem. Referring to its key demo, QVC says millennials are not core customers and the fact they don’t have cable TV has not been a major factor – yet.
As insurance the company offers its channels free in apps, on streaming devices and even through Facebook Inc. (NASDAQ:FBB) Facebook Live broadcasts. As a result, according to QVC, its viewership is still rising.
Behind Those Weak Sales
According to QVC, the force behind weak sales came from 4 places.
Election coverage and the Summer Olympics took away potential viewers. Department stores ramped up their promotions last summer, cutting into QVC’s business.
Some brands like Wen had recall issues and others, Keurig and Vitamix had very few new products to offer.
Finally, competition in the live webcast arena came from Amazon which used the venue to sell beauty products and fashion apparel.
The Real Competition
QVC faces traditional competition from HSN Inc. (NASDAQ:HSNIB) and a handful of others on cable television, but the real competition seems to be coming from Amazon.com and its daily live streaming Style Code Live show.
Style Code Live features two young hosts – Frankie J. Grande and Rachel Smith – who mix entertainment talk, fashion and good old fashioned online sales. The shows feature products available on Amazon.com including makeup, clothing and more.
For now, products revolve around fashion and accessories. It may only be a matter of time, however, before Style Code Live expands to Small Appliances Live, Laptop Computers Live or a whole host of other product lines that lend themselves to Amazon.com’s version of QVC programming.