Thoughts on the QVC-HSN merger

Here are some quick impressions that I posted on RetailWire about QVC’s plan to acquire HSN. “Home shopping” has lost its novelty — especially as TV viewers cut the cable cord — so the combined company faces some daunting challenges:

The initial benefit of the QVC-HSN merger comes from economies of scale in a mature segment. (It’s the same kind of play that Macy’s made for May Company several years ago, recognizing the lack of organic growth in traditional department stores.) But it’s clear that home shopping (via TV) is not where the action is. It’s up to QVC to figure out how to translate the “treasure hunt” experience of off-pricers to its model, and especially how to engage mobile shoppers at its site. It becomes an urgent challenge as more consumers (especially younger ones) continue to cut the cable cord.

Stagnant growth of loyalty programs

RetailWire panelists discussed some new data suggesting that loyalty programs’ growth is slowing at several retailers. Here’s my take on why this may be happening:

Loyalty involves establishing an emotional connection between the retailer and the customer, in order to move that shopper from a state of satisfaction to commitment. But far too often, retailers’ loyalty programs consist of little beyond price incentives. Extra discounts for cardholders may drive more frequency of visit but also encourage bottom-feeding when “loyalists” can apply one sale offer on top of another.

Among many other uses of data science, retailers can do a much better job using predictive technology to tell their best customers about new products of interest — not just when those products are available at the lowest possible margin to the store.

Was dropping tobacco a mistake at CVS?

CVS garnered a lot of publicity a few years ago when it stopped selling cigarettes and related smoking products. More recently, the giant pharmacy chain is making a bigger push into “wellness” categories, at the same time that its comp sales show some softness. Here’s my take, from a recent RetailWire discussion:

The comp-sales problem at CVS seems unrelated to their decision three years ago to drop tobacco products. It was the right decision then, and the “healthy” brand positioning makes sense. CVS is not operating in a vacuum, but is competing against Walgreens — which seems at times more interested in being the neighborhood C-store than in selling health-related products.

The trick now for CVS is to build on its tactical steps and brand equity to grow its topline sales.