One-Channel E-tailers Getting Tuned Out, Says HSN's CEO

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NEW YORK -- E-tailers who only sell over the Internet are doomed to failure.

That was the warning sounded by multichannel maven Mark Bozek, president/CEO of Home Shopping Network (HSN), during an address at Forrester Research's Marketing Forum, "Thriving On the Web and Beyond," held here last month.

Bozek, a Barry Diller protege who served as VP/broadcasting at rival QVC and a TV producer for Fox Television, said the biggest problem with e-tailers is that they are technicians rather than merchants and miss the point that making a purchase is an emotional, impulsive decision.

"Most dot-coms are focused on branding and on the look and feel of their sites, but none of them are great merchants," he said. "The sites have to be interactive. They've got to be exciting and engaging. You've got to give them a reason to come back. But where are the great online merchants? Where are the Marshall Fields? There are no great retailing pioneers in e-commerce."

Offering a hundred thousand items and the lowest prices isn't enough, Bozek said. "It's not the medium that matters. You've got to have unique products that aren't ubiquitous, and the shopping experience needs to be entertaining and always emotional."

Bozek predicted that without new offline alliances, "pure-plays don't have much hope on their own" and saved his harshest criticism for e-tailing role model Amazon.com, which he called "one big, huge mistake.

"In its current model, Amazon is doomed to failure," he argued. "They're a commodity. They've chosen two of the lowest-margin categories [books and CDs] but have a lot of overhead with their huge warehouses and the incredible cost of customer acquisition. I don't see that they can ever reach sufficient scale."

By contrast, HSN.com was profitable after three months and did $50 million in its first year by leveraging existing infrastructure from the company's broadcasting, direct-mail and telemarketing arms -- and by spending nothing on marketing, Bozek noted.

Cyber shoppers are engaged, he said, by online chats with celebrity hawkers, an assortment that is 75 percent unique to HSN, and by phone and direct-mail follow-ups that add $90 million in incremental sales.

HSN, with its 5 million active customers, has found a new respectability among manufacturers, Bozek said. That's particularly true within the electronics arena, which represents 15 percent of total sales with a bullet and $120 million in annual PC volume alone.

"Electronics sell really well in our world because nowhere else can you get a presentation where you can learn how a product like CD-RW or DTV works," he said. "It's real hard getting explanations in stores. Try getting them to tell you how a product works at Best Buy.

"HSN used to be a dumping ground for excess electronics inventory. Now, JVC, Sony and Intel launch via HSN to see how their new products and technologies perform."

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