Home Shopping Network 2013 Annual Report Download - page 7

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New editions of full-color catalogs are mailed to customers several times each year, with a total annual circulation in
2013 of approximately 320 million catalogs. The timing and frequency of catalog circulation varies by brand and depends upon
a number of factors, including the timing of the introduction of new products, marketing campaigns and promotions and
inventory levels, among other factors.
Cornerstone also operates websites for each of its featured brands, such as Frontgate.com, BallardDesigns.com, Chasing-
Fireflies.com, GarnetHill.com, GrandinRoad.com, TravelSmith.com, Improvementscatalog.com and Wish-Works.com. These
websites serve as additional storefronts for products featured in related print catalogs, as well as provide customers with
additional content and product assortments to support and enhance their shopping experience. Additional content provided by
these websites, which differs across the various websites, includes decorating tips, measuring information, online design
centers, gift registries and travel centers, as well as a feature that allows customers to browse the related catalog online. In
addition, a growing number of customers use mobile devices to shop the Cornerstone brands.
Supply
HSN and Cornerstone purchase products by way of short- and long-term contracts and purchase orders, including
products made to their respective specifications, as well as name brand merchandise and lines from third party partners,
typically with 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 partners 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 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 10% of HSNi’s consolidated net sales in 2013, 2012 or 2011.
Marketing and Merchandising
HSNi offers our customers a broad assortment of differentiated products in a compelling, informative and entertaining
format that will inspire them to regularly engage and shop with us. For example, HSN frequently collaborates with experts
from a variety of fields to present special events on the HSN television network featuring HSN products and relevant expert
content. HSN has also begun producing live entertainment as a way to further engage with our customers. These events are
staged at HSN’s television studios or elsewhere. Certain special events are also featured on HSN.com and HSN2 for a limited
period of time following their live broadcast on the HSN television network. HSN also has integrated a gamification strategy
into its e-commerce platform to promote customer loyalty and engagement. In addition, HSN.com has over 50,000 video
demonstrations of products and how-to videos.
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, 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 (e.g., notifying customers when their products will be
featured on the HSN television network).
HSN engages in co-promotional partnerships with major media companies. These are done primarily because they offer
us editorial authority while they also secure print advertising in national fashion, style and/or lifestyle publications to market
HSN to prospective customers in its target demographics. HSN also engages in search engine marketing and targeted offline
advertising. As part of HSN's entertainment strategy, it participates in innovative joint marketing and promotional partnerships
with major motion picture companies as well as well-known recording artists. HSN also creates strategic alliances with world-
class, consumer brands in an effort to reach new prospects through relevant brand integrations and occasion-based event
marketing. These promotions are designed to not only generate additional revenue and create brand awareness, but to also
provide unique experiences for our customers in our continued effort to drive customer engagement as well as position HSN as
a proven and powerful marketing vehicle.
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. Cornerstone employs in-house designers and partners with leading manufacturers and designers to aid in the
development of its unique, exclusive product assortment. The Cornerstone brands use their respective websites 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 enter into other advertising agreements.