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Strategic Retailing
Individual Coursework
BHK0016
Select a non-food retailer operating in the UK who has adopted additional sales channels to maintain or increase
their market share. Provide analysis of their strategy and motivations for creating additional sales channels, and
how this has affected their overall market position
3630 words
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Introduction
QVC (standing for Quality, Value and Convenience) is a technology based retail format that was
launched in the UK in 1993. Its product mix consists of vendor and proprietary brands in the
categories; Beauty, Fashion, Shoes and Handbags (33%) Jewellery (29%) Home and Leisure, Electrical
Goods (19%) and Garden and DIY Goods (19%), to which its main appeal is (biased towards females)
aged 40-65, Mintel Home Shopping Report (2009). QVCs mission is Quality, Value and Convenience
for all customers, and their strong customer focus commits them to giving more brands, more choice
and more entertainment, which is relevant, innovative and fun. By giving viewers varied, interesting
and fast-changing content, it has maintained 24hr shopper interest, and its emphasis on promotion
and special value is a critical element of its success (Mintel 2012).
Their strategic objectives are to maintain a leading position, to expand the customer base, to
continue the search for profitable goods and to position themselves for future growth, of which
Claire Watt (2012, QVC CEO) adds to target people where they live, which, due to innovations in
technology, is everywhere. Essentially, QVC is a department store on air, benefiting greatly from the
increased access of households to the channel due to the digital switchover in 2012, however the
yield from this segments is now exhausted, and is a motivation for seeking additional sales channels
to continue growth. QVC faces many challenges ahead, with the economic downturn and the
competition online from pure play and high street retailer. This report will analyse the current
market environment, the consumer, and evaluate how QVC creates competitive advantage to
remain successful.
The Current Market Environment
A SWOT and PEST analysis will triangulate to depict an accurate positioning of QVC:
S
Aswell as operating a concentration segmentation strategy, QVC have established
themselves without a significant store presence which many stores need to establish brand
recognition. QVC have instead aligned with new technologies including the IPhone/Android
App (Tablets and Smartphones) and adopted a single strategy transferable across all
platforms to avoid channel cannibalization (Berman 2004). QVC employs just 2,000 people,
much of which is cheap, low-skilled call centre labour, and has a portfolio of just 4
buildings, which keeps costs down. It has high bargaining power over suppliers, which
enables them to keep prices down, and has built consumers trust due to their generous 30
day money back guarantee and intensive Quality Assurance Testing (QVC QA 2013).
Through their multi-channel strategy, they are able to select among channels based on
their unique strengths, opportunities and leverage assets (Berman 2004) and have
integrated information system that shares customer, pricing and inventory data across all
channels

W
QVC does not have a bricks-and-mortar store presence, which may deter some older or
young-inexperienced shoppers who seek instant gratification of receiving the product, or
have misgivings about security (Mintel, 2012). QVC has two outlets, Shrewsbury and
Warrington, both located in planned shopping centres, but reviews of both describe the
premises as unorganised chaos which dents the reputation.
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O
QVC has strong knowledge about their customer, and a registered customer-base through
their online membership, whom they can streamline to create a more personalised service.
Also, through recognition of their success stories, QVC can be the first to obtain a new
product, and form exclusive alliance with suppliers which can increase exclusivity and
revenue.
T
Retailers that operate in QVC product categories provide substitutes. The pure-play
Amazon is by far the leading online retailer, holding 11.6% of the market share. Click and
Collect is used by Tesco Direct by those who do not wish to incur delivery costs, and have
recently extended their Click and Collect point to Express stores. House of Fraser (2011) has
established two dotcom stores for the pure services of ordering, collection and returns.
Competitors have also launched cheaper delivery options. Tesco (2012) have launched its
first Delivery Pass Scheme offering free delivery for the first 6 months, and Amazon have a
delivery subscription service (Mintel 2012). Competitors have also introduced Apps to
manipulate and project 3D images of products, Sephora (2011) have an IPod App with an
integrated mirror feature. The Digital Switchover (2012) resulted in all households having
access to the QVC TV channel, giving it a potential audience of 26 million households,
however there is no growth opportunity after this, as QVC will have attained maximum
yield from this channel (although they might combat this by actively seeking new products)

P
Trade Description Act (1968) continues to make it an offense to make false or misleading
statements about goods or services. Distance Selling Regulations (2000) requires clear and
accurate product information, and protection from payment card fraud. Age Restricted
Products, such as the Knives Act 1997, restricts consumers aged 18 and under. Cut of
Corporation Tax (23% by 2014) will allow more money for investment and the Paternity
Leave (2013) may increase viewing habits of males. QVC continues to surpass the Sunday
Trading Act (1994).
E
Consumer spending has been hit by a combination of high inflation, job uncertainty, limited
credit availability, rising unemployment and weak consumer confidence (Verdict 2013). The
rate of inflation (2.8% as of 18/3/13) and the UK losing AAA credit rating (The Guardian
2013) will affect the willingness to spend on luxury items. Although QVC will benefit from
the demise of bricks & mortar retailers in home technology. 30 chain stores-a-day are
closing, the recession and a shift to retail-parks has accelerated the demise of many town
centres (2012)
S
The aging population, the over 65s are expected to rise into 18% of the population (Mintel
2012). 67% of over 65s still own a basic mobile phone, and the smartphone device has yet
to hit mass adoption amongst over 45s and lower income households. However, the
elderly of tomorrow will be experienced in such devices. Considering the rise in affluent
population by 1.1 million (2012), ABC1s are expected to account for 56% of the population
by 2016. Smartphone ownership is more popular among the fairly affluent customer, with
more disposable income to spend on luxurious products; 77% of homes earning over
50,000 a year own a smartphone. Verdict (2013) predicts the DIY & gardening sector will
be the largest growing, because of longer life expectancy.

T
The uptake of smartphones has risen 10-55% (2009-2012) and the tablet 0-19% (2010-
2012) which translated into 10.9% of online sales in 2012(Mintel 2012). Participation is M-
commerce varies by category, the most prevalent were home-ware, digital and beauty
sales(Mintel 2012)


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Are QVC in a good market position?
A consumer must make a deliberate decision to visit one of QVCs channels, online, App-wise or via
TV, and so the diversified mix between exclusive proprietary brands and special value must be an
incentive to visit a QVC platform. In 2011, QVC market share amongst non-store retailers in Europe
was 5% (Mintel 2011)
In terms of Online, Amazon is the pure-play dominator, offering similar product categories to QVC. In
2012, internet pure-plays owned 24% share of the home shopping market (Mintel 2012) of which
Amazon held 11.6%, other major non-food retailers account for 25%, of which QVC is a small
proportion. Often there is a limit for pure-plays, the market leader of 1990 (Shop Direct) is in steady
decline, as online stores have consumer pressure regarding low-prices and special offers as the
norm.
In terms of TV shopping, Sit-Up TV (Bid-TV, Price-Drop TV and Speed-Auction TV Brands) is also on
the decline, as sales fell by 14% in 2011 due to low consumer confidence. Their USP offers live,
interaction speed-auctions using a falling price mechanism, but as consumers are more price-
sensitive their product mix of non-essentials is failing. Ideal Shopping Direct offers a diverse range of
products, alongside the additional channel of a catalogue. Family, Friendship and Fun is their
mantra, and their profits rose strongly by 13.5% in 2011 due to wide-spanning internet presence.
According to sales figures, QVC owned 59.9% on the TV shopping market in 2011.
Changes in QVC as a result of conflict span from Argos introducing their Check & Reserve IPhone
App in 2010, of which QVC had to follow suit in 2011. Mobile shopping now accounts for between
5-6% QVC sales (Reuters 2012) and the QVC App features Todays Special Value on the homepage
and live streaming. Technology suggests that the App will be available upon future Televisions
(bigger screens), hoping to revolutionise the use of TV instead of abandoning. As a competitor, Argos
have begun a huge reshuffle, with plans to reduce the use of its catalogue, plans to close 50 stores
(2012). The purpose of stores will be adapted in order to support their digital offering, as they are
store-market leaders in selling tablets and e-readers.

Argos had a brief 2 years operating a TV shopping channel according to Retail Week (2013), but will
axe it this year as it is not as profitable as hoped, and is reaching the wrong audience. This may act
as a deterrent to those considering competing with QVC, who have retained their concentrated
target audience.

QVC has a mix of exclusive and selective relationships with their suppliers (McGoldrick 2002),
through their proprietary brands (Diamonique, Kitchen Traditions) and Vendor brands (Toshiba,
Samsung) of which they have bargaining power over the easily substitutable brands and products.
They form channel alliances with some manufacturers and operate in a vertical marketing system
with others. Because of their supply strategy of limited stock and uniqueness, their prices should be
inelastic, but it is the value perceived by the customer that influences the products demand. Offers
such as Special Value, Hot Picks, and Beauty Pick Of The Month (Free Delivery) add to the
value perceived by customers.

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The Target Market
Segmenting identifies heterogeneity between segmented markets, and homogeneity within the
market segments, demonstrating a critical understanding of the customer, their changing nature and
behaviour and QVCs response to their needs. This report will stratify across the channels that QVC
adopts (Online, Television and Tablet/Mobile Apps) and the different demographic, psychographic,
behavioural and geographical elements of each segmented market. QVC uses this knowledge to
identify potentially profitable segments, and disregard unprofitable ones.
Tablet/Smartphone
While this segment is growing among under 45s (gadget-driven males) and affluent households
(Mintel 2012) the prime target market for QVC, as defined by QVC, is 35-64 year old females. As
described by Watt (2012) QVC has recognised that the different platforms are used for different
benefits, while the tablet function is for browsing experience, the smartphone app is used as an
ordering mechanism, because of its safety features (Powered by Norton). Watts strategy is to focus
the company from just television to a content producer on all of the new devices, to strengthen the
Convenience value. Mintel (2012) also states that a small proportion (14%) of affluent home-
shoppers shop from the office, which this channel may tap into to increase sales. Also, participation
on this channel is rising across all segments, but at a slower rate with the elderly, and so QVC is
strategically preparing.
QVC Android App now accounts for 5% of sales, and has all of the functions of TV and online into one
device. Consumers can buy directly through the App Speed Buy feature and Call to Order
function. The App also gives users the function to stream live TV, share updates with their friends
and has an inventory of 95,000 items by product description, item number, word or brand for
browsing.
Online
The online service features as a catch-up for those who have work obligations, and also benefits
that include evaluating merchandise, comparing merchandise, virtual communities, safety and
convenience. Enthusiasm was shown by older shoppers in posting and reading reviews (80% of the
over 55s) and this was put down to reasons of free leisure time and a sense of wellbeing for
benefiting the company and community. The product mix online shoppers shop for is Clothing (23%)
Electricals (21%) Toys and Games (12%) Books/CDs (6%) Beauty (7% Furniture (9%) Other (5%),
which reflects QVCs online range, although it was reported 72% like to browse online, buy in store.
Social Media is also included in the online category, of which QVC operates Facebook, Twitter,
YouTube, Pinterest pages give product reviews, information and filmed demonstrations, which serve
as entertainment platforms. There is minimal enthusiasm for following brands on social networks,
and only 14% had clicked the Facebook Like facility, which indicate that this is an area for
development.
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Its now not just important to have an online presence, its vital to have a multi-platform retail
experience, that engages and impacts on customers at every level. With that in mind QVC have
enabled our customers to interact with each other, ask live questions on Facebook and stream QVC
shows on YouTube.
TV Shopping Behaviours
Major consumers of TV home shopping are known to be middle-aged females (Grover 2006, Hill
2005, Kim & Lennon 2000), however segments in TV shopping have diversified due to the growth of
internet and mobile Apps (Park, 2011). This channel once held negative images such as old-
fashioned, tacky merchandise and the addicted TV shopper.
Park (2011) identifies shopper segments based on benefits sought from TV shopping, and Benefit
Segmentation focuses on specific attributes of products and services that consumers consider in
their shopping. Some underlying benefits include quality (Harden 1996: James & Cunningham 1987;
Park & Lennon 2004), lower prices than competitors (Alcaniz et al 2004), the uniqueness and
exclusivity of products (Solomon 1994), and attractive product promotions. Park (2011) identifies
four segments of TV shoppers:
TV Shopping Segments
[1]The Convenience Seeker (Park, 2011) are un-gendered middle-aged (40-59) shoppers seeking
quick and efficient viewing, and who are attracted to utilitarian benefits including the right prices,
quality and return policy. QVC appeals to this customer by notifying what products are showcased
now and next, and an online TV guide to show the appropriate timeslots. QVC offers a 30 day
money-back guarantee for dissatisfaction, even when the product is used up, and extended 60-day
money back when the product takes longer to show results. This sector is also targeted through
price discounts and membership, for which QVC allows an email newsletter subscription with
discounts and content.
[2]Uniqueness seekers are impressed by the exclusivity of products offered only from TV Shopping
Channels. Unique and novel products that are hard to find lure these customers (Christman, 2008),
and distinctive packages uniquely put together with a different pricing strategy secure the value for
this segment. To reach these customers, QVC secures the value rather than lowering the price,
selling products as bundles, and also they have proprietary brands such as the Diamonique
collection, exclusive to QVC (2013) Product categories also include collectibles appeal to this
market.
[3]The Product orientated shoppers are majority female, 60 and older, who demand perfect quality
(Hill, 2005). To these, making the right purchase is more important than saving time. QVC appeals to
this audience by presenting expert information, knowledgeable and friendly interactive program
hosts, and expert instruction in demonstrations. Further motivations are presenting testimonials
online and verbally on air, reciting guarantees and hassle free returns, and persuasion by price
comparison.
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[4]Finally, the Apathetic shoppers are the better educated, representing the largest percentage with
a bachelors degree. This group is typically male, and are driven by gadget marketing tactics such as
interactive services (Red button, Apps, Social Networks), and view TV shopping as entertainment
rather than a shopping medium (Murphy, 2009). QVC targets these by integrating more gadgets into
their product mix and their ordering methods.
There are also those impulsive shoppers, who by chance watch TV without planning, and order as
there are few alternatives at that moment in time, this is motivated when shoppers feel intimacy
with the host, and tend to make a sudden purchase. And compulsive buyers, who are motivated by
positive reinforcement created by the host, telling them how attractive they might look with this
item (Jacobs 1986), these often have low self-esteem. And the elderly shopper (Harden 1996)
benefit from the entertaining aspect of the show, because it alleviates their loneliness. QVC provides
them with a community online, or the chance to interact with the hosts and brand co-ordinators
How QVC channels are Creating
Competitive Advantage
When the target audience is segmented, by focussing on the controllable variables such as the
products selected for airing, and the timeslots and promotional efforts, QVC has a degree of control
over some uncontrollable variables such as the consumers buying. Being the market leader in TV
Home Shopping also means they can influence their competition, by providing them with untouched
segments and suggesting strategic channel alliance.
QVC product range across channels is constantly innovating, blending a mix of Fad, Fashion and
Staple products (Rogers Diffusion of Innovators, McGoldrick 2002) which have lifestyles accordingly
[FIG 1]. QVC alleviates this by constant trend tracking and supply chain strategy if QVC feels their
customer will not respond to a product, they will not buy into it or will stock a very small quantity, as
it will dent their reputation of a strong customer focus.



FIG 1
Rogers Diffusion of Innovators
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QVC is a customer-focussed retailer, and without support and revenue from its customers, it would
fail in the economic downturn. The multi-channel strategy adopted by QVC adds value to existing
customers and reaches out to more customers. This Customer Driven Value Chain provides an
analysis of the linkages made that leverage QVCs multichannel assets, which create competitive
advantage towards customers
The Consumer Driven Value Chain
This chain shows how QVCs focus towards the customer is distributed among the levels of the
consumer value chain, providing an added level of value on each. Without one of the levels, the
perceived value of the others will be affected.
Customer
Needs
The QVC mission statement promises quality value and convenience, to giving more
brands, more choice and more entertainment, which is relevant, innovative and fun.
This is what is promised and so this is what is expected.
Integrated
Channels
Customers can access QVC through an extensive range of channels to suit them
(Convenience): Improved TV channel, new Chiswick studio, the QVC Beauty Channel,
Online TV Streaming of both of these channels, Online ordering service, Telephone
ordering service, Text ordering service.

Products
/Services
The Channels are supported by Quality products and services. Financial Services: 3
easy payments, offered, Debit/Credit Card or Over the phone
Customer Service: Via Telephone, Via online, Via Text, Via Forums, Via Social Media
Promotion Service: Media Relations, Broadcast Material, Controlled communication,
face -to-face event , Online Newsletters, Demonstrations
Flexible
Processes/Inf
rastructures
QVC has 4 buildings in the UK, two outlet stores, One distribution centre in Knowesly and
One Head Office and integrated studio. These are brought together by an online
infrastructure that effectively links all channels. And one single warehouse regardless of
which channel was used by the customer to purchase, making purchases easy to track.
QVC also has a customer database which is controlled by membership, which makes
dealing with customers quick and efficient.
Core
Competencie
s
QVC has a non-exhaustive list of proprietary brands, which means they are the single
seller of some unique items, such as the Diamonique collection. The have maintained
a strong brand image in themselves and dominance in the TV home shopping
market. QVC has a clear and defined understanding of their singular target market,
which is surrendered by other competitors
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The Retail Value Chain analysis helps QVC assess potential sources of competitive advantage. Each of
the levels emphasises the different components of QVC and their contributions to the value creation
process. It is the combination of all of the components that leverage the assets that is unique to
QVC. QVC brings value to its customers in different ways through its value chain.

Inbound
Logistics
Outlined in their Vendor's guide, products are selected with the customer focus in
mind. QVC may turn down 1 million products in a year to select just 5,000 of them
which gives them bargaining power. When a product is selected and bought, the
product is transported from the supplers warehouse to QVC's Knowesly warehouse
for stock co-ordination and immediate dispatch.
Operations
Products are tested rigourously in the Quality Assurance Department following the
framework below[FIG 2] and priced accordingly. Defective products are handled and
perfect products are selected for packaging accordingly, in terms of fragility and safety.
Products that are featured on air will have information and procedures that the TV
hosts will learn to present to the customers. Product descriptions online will be
perfected to adhere to the Trade Description Act (1968). This is all done to give the
product the best chance of selling, and toquicken delivery time
Outbound
Logistics
Orders are made flexible through Online at QVCUK.com, With a remote control
via interactive service QVC Active TV, Via automated touch-tone telephone
ordering system QCut on freephone , By using QVC Mobile text, By iPhone using
the QVC iPhone app or Orderline team on freephone. Payment is only credit or
debit card. Orders are sent by Royal Mail First Class and are trackable, esimated
delivery is calculated and stock is adjusted accordingly. Customers details are
stored by membership to quicken this process.
Marketing
and sales
Marketing and sales is done by all expected channels such as social media (Facebook,
Twitter, Youtube) membership and email newsletters . Augmented marketing and sales
are done via TV which adds the creativity and personality to the products that reading
about them does not convey. Customers are also invited to attend the live showsgiving
them first hand view of the products and an ability to meet the designers and brand
hosts in person.
Services
Customer Services are outlined in the customer value chain, financial services
offered by QVC are augmented to the customer to suit their "Convenience"
needs. One strategy is through "Easy Pay" which allow the customer to pay in
2,3 or 4 monthly installments. Advanced order allows the customer a
guaranteed product after QVC has re-ordered in response to demand."Waitlist"
service allows the customer to be exclusively notified should an out-of-stock
product be back in stock, and autodeivery allows customers to be repeat
purchasers. Text and email notifications are available on "Todays Special Value"
items, giving members who have subscribed to these services first access.
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Conclusion
In conclusion, QVC manages to maintain a consistent image across all the multi-channels it operates.
Each channel must have a unique role that leverages the other channels, otherwise channel
cannibalization will occur, or revenue will be lost trying to maintain a dormant channel. A well-
integrated multi-channel format allows customers to examine the goods on one channel, and have
the option to buy them or seek further information on a supporting channel (Park 2011). This value
chain upon the channels uniquely chosen by QVC depicts how each channel supports the others, and
gives opportunities to increase sales, while taking account of the others weaknesses:

QVC TV
Available 24 hours a day, 7 days a week, it features 17 hours if live broadcasting and
7 hours of "The Best Of QVC Repeats". It is where the personalised advice and
augmented customer relationship is formed, where the trust is instigated and where
customers relate and empathise with the hosts through the use of friendly hosts and
celebrity/brand guests. It allows the option of telephoning in to initiate a sale, or
provides an item number for location online.Customers are also allowed into the
audience. Strength: Pause and Record, Weakness: Lack of youth audience.
QVC BEAUTY &
STYLE TV
Oct 2010
The QVC Beauty channel available 24 hours a day, 7 days a week,is a beauty-dedicated
channel which reduces the caller traffic for the QVC TV channel. Customers appreciate this
channel as it is more streamlined to their interests and needs, and offers more content for
the price of their attention. Watchers are able to identify with the hosts, communicate
with brand-guests, and there is a seperate studio audience for ths channel. This channel is
also 17 hours of live broadcast and all content is available online. Strength: segmented
audience, Weakness: Lack of a youth audience, middle- aged targeted product mixc

ONLINE
Online features the complete range of products, categorised by type for easy
browing, and also a product location by item number. Items are easily locatable and
a thorough description is given for each, including ingredients lists, blogs upon the
hosts can be read upon to form a closer relationship and understanding of the hosts.
Subsciption to emails and membership can be instigated online, which will aid the
phoning in process. Access to all social media content is available online, and gives
opportunity for the customer to be further involved. TV guide and links to the live
streaming of QVC TV and QVC Beauty channel are online, with live RSS updates.
SMARTPHON
E APP 2011
The Smartphone App streamlines the online offering. It gives access to "Todays
Special Value" item, and a search facility that allows full access to the product range
offered online. App users can use the "Buy Now" function, or integrate the
telephone aspect with the "Call to Order" function. The App saves your customer
details to your phone for future use. You can stream Live content for travel onto the
Iphone or Android phone over a 3G/4G or wi-fi connection, check the TV guide, read
ratings and reviews, and share favourite items over social media Apps the user is
logged into. Weakness: No enthusiasm from the elderly customer
TABLET APP
2012
The Tablet App is the same offering as the Smartphone App, but gives a better
viewing experience with a wider screen . QVC knows this and so integrates image
manipulation into the Android App, however the Tablet App does not allow the
call function. This platform is better used for viewing while travelling. Strength:
reaches the right "affluent" customer. Weakness: No enthusiasm from the
elderly customer, no call function.
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Conclusion Continues
Through the use of carefully selecting channels, QVC has augmented their business to reach the
concentrated customers they have targeted, but with opportunity of growth. As the capacity of TV
viewership has been exhausted due to the digital switchover, QVC is participating in Apps to increase
their revenue. Despite the uptake of Smartphone/Tablets not being prevalent in the over 45s
category (Mintel 2012), the expanding, long living elderly of today may be educated in new
technologies such as this, and it also taps into the younger market who may not have discovered
QVC yet.
Through the use of multi-channel, QVC are able to streamline and highly integrate their promotions
and pricing strategies across all platforms (Park, 2011) as it appears retailers such as John Lewis are
in the painstaking process of matching their online prices with their in-store prices (Mintel, 2012).
With QVCs multichannel strategy, they are able to have product and price consistency across all
channels, as the lack of a store-front reduces staffing costs, rent costs, cost of excess overheads, and
also all stock is stored in one distribution warehouse, reducing the need for travelling between
warehouses, and re-stocking stores.
QVC has recognised that the different channels complement each other, and Watt (2012) CEO of
QVC has initiated further research into what each platform is used for specifically to further enhance
the QVC multichannel experience. Mintel (2012) recognises that there are no figures available, or
measureable, to describe which channel is used for browsing, against which channel is used for
purchasing, should a multi-channel shopper have used all channels, and this is room for potential
growth in the future.
(There is also potential growth for the Insomnia Shopper. Those who cannot sleep at night often
find QVC a therapeutic channel to watch as it is the only channel with entertainment and interactive
elements through the early hours of the night (Mintel 2012) and it is estimated that 1% of these
shoppers are enticed to make a purchase.)
Consumers view QVC as a single retail entity with complimentary distribution alternatives, a
message is created and distributed across all channels, and promotions are planned on a horizontal
level. This may benefit QVC, as according to Retail Weekly (2013) by encouraging online sales they
may be able to recover the 2-4% revenue spent on receiving telephone calls.
And QVC continues to grow. Gross orders from 2009 to 2011 has grown from 428-455 million,
active customers have grown from 961,000 to 1,033,000 between 2009 and 2011, and packages
shipped has risen from 13,057 million to 14,306 million in the same time period. Of this 96% of QVC
revenues are generated from repeat customers, proving that their multi-channel strategy is winning.

Limitations
QVC are very private about the release of sales information across their channels (Mintel 2012)
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Fig
2

QVC Vendor Guide Quality Assurance
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