QVC to Expand in France, Undaunted by Soft Economy
QVC Inc. is planning to expand into France, betting that the television-shopping network can thrive even in a heavily regulated country with a stagnant economy.
France may seem like an odd pick for a company whose most-recent foray overseas came about 18 months ago in faster-growing China, but that’s not stopping QVC Chief Executive Officer Mike George from pressing ahead. The company will begin broadcasting from Paris in the second quarter of next year. George said he couldn’t care less about sluggish economic growth or high unemployment. He’s done it before. The company bucked conventional wisdom more than three years ago when it entered Italy during a steep recession.
“We can take share, even in a soft economic environment,” George said by phone. “A lot of people thought we were crazy to launch in Italy.”
Sales in the southern European country have more than tripled in the past two years despite political turmoil and a shrinking economy. That gave George confidence to enter France. The move will push its reach to eight countries outside the U.S. as George tries to revive growth at QVC, a unit of Liberty Interactive Corp. (LINTA)
Liberty Interactive, controlled by billionaire John Malone, also has a minority stake in fellow shopping network HSN Inc. (HSNI) and several websites. The company said last year that it will divide into two tracking stocks. One would place QVC, which makes up 77 percent of Liberty’s sales, in the QVC Group along with the 38 percent interest in HSN. The other would be called the Liberty Digital Commerce and house the e-commerce businesses.
The shares rose 0.7 percent to $29.37 at the close in New York. Liberty has gained 0.1 percent this year, compared with a 0.8 percent advance for the Standard & Poor’s 500 Index.
Since George joined QVC in 2005 from computer-maker Dell Inc., where he served as chief marketing officer, he has wanted to make the network a global brand. QVC -- which stands for quality, value, convenience -- began broadcasting in the U.S. in 1986. It ventured overseas a decade later to Germany and by 2001 had added the U.K. and Japan.
QVC, based in West Chester, Pennsylvania, took almost a decade off from expanding before debuting in Italy in October 2010. George now has the goal of opening a new market every two years. Possible locales include emerging economies such as Brazil, a regional station for the Middle East and even more economically troubled European nations like Spain.
“We just don’t worry about economic cycles,” George said. “When we are thinking 20 years out, it doesn’t matter a whole lot.”
That’s because George believes that QVC’s template of what he calls “high integrity” product pitches can win in any market that has people with enough disposable income to buy everything from a $400 Vitamix blender to $25 sandals. By using television shows with likable hosts and inventors or celebrities like Joan Rivers or Rachael Ray presenting their products, the programing contrasts with infomercial hype.
While that formula helped build a business that reached $8.62 billion in sales last year, growth has slowed. Revenue rose 1.3 percent in 2013 after a 3 percent gain in 2012. Entering new markets along with continuing to gain market share in the U.S., where sales rose 4.6 percent last year, will be key, he said.
Italy is the company’s smallest division with its $127 million in sales last year making up 1.5 percent of the company’s total, but it accounted for more than a third of its revenue growth in 2013.
In France, QVC will be entering Europe’s second-largest economy. To reverse two years of little growth, President Francois Hollande has pledged tax and spending cuts to stoke the nation’s recovery. France’s economy is projected to grow 1 percent this year, 1.3 percent in 2015 and 1.4 percent in 2016, according to economists surveyed by Bloomberg.
After several years of looking at ways to enter France, George almost gave up. French laws require a foreign company to buy a minority stake in a domestic company to broadcast over the air. QVC considered this, but it couldn’t work out a deal.
Hollande’s administration, which came to power in 2012, has expanded digital broadcasting access, making it easier for QVC to enter the country.
Also helping QVC in France will be hiring about 200 locals to develop the programming and pick the brands -- both domestic and international -- to lure French consumers, who are often very particular when it comes to shopping.
The company’s focus on customer service, including a liberal return policy, should help it stand out too, George said.
“We have such a differentiated level of customer service,” George said. “That’s true in every market, but I think that will be especially true in France.”
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