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THE MIAMI HERALD
Home Shopping TV -- Latin Style
Key Deals In Puerto Rico And Mexico Ignite Growth At The Network That Sells Products With A Decidedly Hispanic Flavor
By MIMI WHITEFIELD
October 7, 2001
ST. PETERSBURG -- Mexican actress Lucía Méndez holds up a piece of amethyst-encrusted silver jewelry from her Aztec-inspired collection and tells television viewers, ``This is a beautiful piece, a feminine piece.''
Gabriel Varela, a Mexican soap opera actor, double teams, driving home the message: ``The necklace, the bracelet, the earrings -- for only $40.12.''
It's Home Shopping Latin style. Not only is the language Spanish, but Home Shopping Español features Latin celebrities as program hosts and many products tailored for Hispanic shoppers from Mexico City to San Juan to Miami.
Not only do Hispanics spend more time with their TV sets (3.75 hours daily compared to 2.73 hours day for non-Hispanic adults, according to Strategy Research) but their growing purchasing power and numbers have companies across America scrambling to come up with Hispanic strategies.
Among the hse products with Latin appeal are Méndez's ``Ollín del Amor'' jewelry line, inspired by an Aztec love legend about the volcanoes Popocaltepetl and Itzclacihuatl, and hair care products touted by Samy, Miami's hairdresser to the Latin stars.
Charytín, the Dominican comic actress, makes guest appearances selling her line of amber jewelry, and Lucy Pereda -- the Spanish-language Martha Stewart -- demonstrates cookware and other kitchen products while whipping up Latin recipes and selling her low-cal cook book.
Hse, whose distribution is split about equally between cable and broadcast, now reaches more than 50 million homes in 22 U.S. Hispanic markets, Puerto Rico and Mexico.
The channel shares a 53-acre campus with its much larger parent -- USA Networks' Home Shopping Network -- and piggybacks on the infrastructure that enabled HSN to sell more than $1.8 billion worth of products and handle 7.5 million calls last year.
But John de Armas, the general manager of hse, hastens to point out: ``This is certainly not HSN in Spanish. The look, the feel, the products are uniquely tailored to the Hispanic market.''
David Joyce, a media analyst at Miami's Guzman & Co, says the type of programming offered by hse ``definitely has a place. The Hispanic population (now 35.3 million) is growing much more rapidly than the population as a whole.''
Hispanics, he points out, account for 12.5 percent of the population, but only account for 8.9 percent of consumer spending. ``That gap should be closing within the next 10 to 15 years and that's where the business opportunity is. Hse definitely has a viable business model.''
The HSN brand now spans the globe with other home shopping shows in Germany, Belgium, France, Italy, the Netherlands, Japan and China.
Hse began modestly in December 1999 as Home Shopping en Español, a three-hour a day pilot created with Univisión to run on its Galavisión cable channel. A year later it struck out on its own as hse. In July 2000, it began broadcasting 24 hours a day, 7 days a week and started to build 25 low-power TV stations in key Hispanic markets around the country.
But this has been the real growth year for hse, de Armas says.
In February it launched in Puerto Rico.
This spring, hse signed an agreement with PCTV, one of Mexico's largest cable providers, giving it access to 7.5 million homes, and launched its 24-hour programming in Mexico on May 31. In July, hse began broadcasting in Mexico City through an agreement with Cablevisión-Televisa .
The expansion into Mexico makes hse the only live Spanish-language channel seen simultaneously in the United States, Puerto Rico and Mexico.
That means that a viewer in Hialeah, for example, can call hse's 800-number and send an on-air greeting to her sister-in-law in Mexico City and then order a ring for her birthday. The order is transmited via computer to a Mexican fulfillment center and then delivered by a Mexican logistics company within three to seven days.
U.S. and Puerto Rican orders are fulfilled out of warehouses in Salem, Va., and Waterloo, Iowa. Some 250 operators at call centers in Miami and Monterrey, Mexico, handle the calls.
Hse has been on an expansion kick in the continental United States, too. In April, it signed an agreement with GEMS TV, the Miramar-based cable subsidiary of Telemundo International, to carry a 12-hour programming block. GEMS will be relaunched as mun2 -- a channel aimed at young Hispanics on Wednesday -- but will continue to air the midnight until noon hse block.
The network also can be seen in South Florida on WEYS-Channel 22 (Key West), WEYS-Channel 55 (Miami) and WEYS-Channel 21 (Pompano Beach).
Telemundo and hse have cooperated in other ways. After the Sept. 11 attacks, hse canceled its shopping programming and began broadcasting Telemundo newscasts until the following day.
Although St. Petersburg may seem a bit removed from the crossroads of Hispanic U.S.A., the Tampa Bay area is where HSN began quite by accident 24 years ago. Back in 1977, an advertiser on an AM radio station in Clearwater couldn't pay his bill, and offered 112 electric can openers instead of cash.
The station owner decided to auction the can openers on the air. They were a sellout. That led to Suncoast Bargaineers, a regularly scheduled radio show, and then to the Home Shopping Channel on a Tampa Bay local access cable channel.
Nationwide broadcasting of the Home Shopping Channel began in 1985 and a year later the company went public as the Home Shopping Network. Barry Diller bought controlling interest in the company in 1995 and began acquiring assets that included Ticketmaster and the television holdings of Universal Studio, including USA Network and Sci-Fi Network.
HSN changed its name to USA Networks in 1998, and Home Shopping Network became a unit of USA Networks.
All the time the shopping network has been evolving. It now reaches 155 million households worldwide, ships around 100,000 packages a day and employs 4,500 people -- about 3,000 of them at the St. Petersburg facility.
It is so large that HSN President & CEO Mark Bozek scoots around the campus on a flamingo-shaped golf cart. The campus includes a call center that handles 200,000 phone calls daily and a quality assurance lab where any product that is sold on the air is put through rigorous tests.
Scientists take apart cookware, do assay testing on gold jewelry, make sure food products meet state and federal regulations and put garments through the wash to see how they'll hold up. Nothing gets on the air without two to three months of testing, de Armas says.
Although hse and Home Shopping Network share many of the same facilities, it's obvious when one enters Español territory. The walls are painted a vivid tomato red and yellow, the sets are brighter and in a corner of the set where Méndez sells her jewelry collection, votive candles surround a stone Aztec god who presides over a bowl of red rose petals.
Most of the 22,000 products offered on HSN are also sold on hse, and the Spanish-language channel plans to introduce a website in the first quarter of 2002 where products sold on the air will be available.
Hse's presentations are always geared to appeal to the Hispanic family, de Armas says. A presenter selling computers, for example, might bring her children to the set and show how she can help them do their homework on the computer.
Hse customers are slightly younger than Home Shopping Network buyers, but the U.S. Hispanic population also is younger than the general market. Some 70 percent of viewers are women.
Although hse shares certain elements with any television network, ``the business is much more than television,'' points out de Armas. ``This is a store, a call center. Logistics and new market penetration are really important as well.''
AROUND THE CLOCK
It's also a 24-hour operation with live programming going out 18 hours a day and the best tapes of the day airing in the early morning hours. Hse has a number of full-time hosts, as well as guest stars like Charytín and Samy who may arrive weekly or monthly to do their shows.
``The phones just light up when Charytín does her shows on Saturdays and Sundays. Her amber jewelry line sells out almost every time she presents it,'' says de Armas.
Unlike most television networks, the Home Shopping channels don't measure their success in terms of ratings. They work on a dollars sold per minute basis.
Hse executives declined to break out the network's financial results from those of HSN's other electronic retailing operations, but de Armas says hse's sales are ``well above plan.
``In Mexico City we're selling 2 1/2 times more than the business plan called for,'' he says, ``and when we went into Puerto Rico sales doubled by the second week.''
During the second quarter, HSN's combined revenue, including its international operations, grew 15 percent to $462 million.
De Armas sometimes listens to incoming calls. ``They tell you what the audience likes or doesn't like. I love the raw honesty,'' he says. ``We get instant feedback and you don't have to wait until the end of the month to see the financials.''
Right now hse is focusing on the Mexican market ``because it's such a huge opportunity for us,'' de Armas says. Another current goal is to expand hse's distribution on U.S. cable systems.
With so many channels competing for cable carriage, ``it's never an easy sell,'' de Armas says. ``But the cable companies love to hear our success story and we're very hopeful we'll get access to more cable systems.''
De Armas declined to specify where hse might head next, but says opportunity often drives expansion. ``Our vision,'' he says, ``is to stretch from Los Angeles to Buenos Aires, and we plan to have 300 million to 400 million Hispanics watching us.''