Home Shopping Network 2008 Annual Report Download - page 8

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party vendors, typically under certain exclusive rights. The terms of these contracts and purchase orders vary
depending upon the underlying products, the retail channel in which the products will ultimately be sold and the
method of sale. In some cases, these contracts provide for the payment of additional amounts to vendors in the form
of commissions, the amount of which is based upon the achievement of agreed upon sales targets, among other
milestones. In addition, in the case of some purchases, HSNi Businesses may have certain return, extended payment
and/or termination rights. The mix and source of products generally depends upon a variety of factors, including
price and availability, and HSNi manages inventory levels through periodic, ongoing analyses of anticipated and
current sales. No single vendor accounted for more than 5% of HSNi’s consolidated net sales in 2008, 2007 or 2006.
Marketing and Merchandising
HSN continuously works to bring customers a broad assortment of new and existing products in a
compelling, informative and entertaining format. For example, HSN frequently collaborates with experts in a variety
of fields to present special events on the HSN television network featuring HSN products and relevant expert
content. In most cases, these events are staged at HSN’s television studios, and to a lesser extent, staged at venues
associated with featured products. Online versions of certain special events are also featured on HSN.com for a
limited time period following their broadcast on the HSN television network.
In an effort to promote its own differentiated brand, HSN seeks to provide its customers with unique
products that can only be purchased through HSN. HSN frequently partners with leading personalities and brands to
develop product lines exclusive to HSN and believes that these affiliations enhance the awareness of the HSN brand
among consumers generally, as well as increase the extent to which HSN and/or products sold through HSN are
featured in the media. In some cases, vendors have agreed to market their HSN affiliation to their existing customers
(i.e., by way of e-mail notifying customers when their products will be featured on the HSN television network).
HSN also engages in co-promotional partnerships with major media companies to secure print advertising
in national fashion, style and/or lifestyle publications to market HSN to prospective customers in its target
demographic, as well as search engine marketing and targeted offline advertising around the holidays and other key
promotional periods.
The Cornerstone brands differentiate themselves by offering customers an assortment of innovative
proprietary and branded apparel and home products. In many cases, Cornerstone, seeks to secure exclusive
distribution rights for certain products. In addition, Cornerstone employs in-house designers or partners with leading
manufacturers to develop exclusive new technology, such as wrinkle free fabrics. The various Cornerstone brands
use their respective websites to promote special sales events and e-mail marketing to promote special offers,
including cross-promotions for other Cornerstone brands. In addition, Cornerstone partners with third parties to offer
promotional events such as sweepstakes and/or other advertising agreements. HSNi believes that these affiliations
enhance the awareness of the Cornerstone brands among consumers as well as strengthen its various brands overall.
Order Entry, Fulfillment and Customer Service
HSNi provides customers with convenient options in connection with the purchase, payment and shipment
of merchandise, some of which vary by brand, business or product. Merchandise may be purchased online or
ordered using toll free phone numbers through live sales and service agents. HSN also offers the convenience of an
automated attendant system and, in limited markets, remote control ordering capabilities through pay television set-
top boxes. Cornerstone’s catalog orders can also be made via traditional catalog sales order form submissions.
In addition to traditional payment options, such as credit and debit cards, payment options include private
label credit cards and, in the case of HSN, Flexpay, pursuant to which customers may pay for select merchandise in
two to six interest-free, monthly credit or debit card payments. HSN also offers its customers the convenience of
ordering products under the Autoship program, pursuant to which customers may arrange to have products
automatically shipped and billed at scheduled intervals. Standard and express shipping options are available and
customers may generally return most merchandise for a full refund or exchange in accordance with applicable return
policies (which vary by brand and business), subject to restocking fees for custom merchandise in the case of
products sold through Cornerstone. Returns generally must be received within specified time periods after purchase,
ranging from a minimum of thirty days to a maximum of one year, depending upon the applicable policy.