Home Shopping Network CEO says it's a good time to be a retailer

If timing is everything, Mindy Grossman had little to work with last year. The long-time Nike executive became CEO of HSN Inc. (HSNI) in 2006, as it struggled to find its place in the stable of Barry Diller's InterActive Corp. (IACI).

IAC spun off businesses, including HSN and TicketMaster, as separate public companies in mid-August 2008, just in time for the stock market collapse. HSN's stock tanked from around $16 per share to a bottom of $1.40.

Grossman led an effort to revamp HSN's programming and products, adding designers, star chefs and celebrities. Customer service was overhauled, including bringing offshore call centers back to the U.S. And an improved web site, video on demand and cellphone video offerings added more shopping channels.

The stock has recovered, as the company reported improving finances this year. HSN posted net income of $13.6 million in the second quarter, compared to a loss of $249.8 million the year before, as the company controlled costs and improved cash flow.

Grossman recently met with DailyFinance to discuss how a retailer can manage both an IPO and a recession.

DailyFinance: This is not a good time to be a merchant.
Mindy Grossman: I actually think it's one of the most exciting times to be a merchant. I've always had this theory that scarcity drives innovation. If you have to be creative and you have to do more with less, it's amazing what you come up with.

DF: Why change HSN? Did you want a more upscale demographic?
MG: I knew how many people were engaging in lifestyle television -- whether it's Food Network, HGTV, Style, DIY or any of those (channels) -- myself included. And I realized you couldn't get any of the product.

So I said: Why don't we flip things around and really focus on being as intriguing, entertaining and editorial as those networks, but we supply the product and the commerce to satisfy the demand?

The more that content on TV becomes watchable, the more we're able to leverage that content. So now you can see the live show with streaming video on TV, online or on the iPhone -- basically wherever you want to access it.

DF: Why take on Amazon online?
MG: We absolutely, unequivocally are not trying to take on Amazon.

Amazon, Wal-mart -- no question, they're powerful. (But) they are aggregators of product. We consider ourselves a curator. We know our customer, we know how engaged she is and we know her needs, her patterns, etc. We've done that editing for her.

Seventy percent of our product is proprietary; you can't get it anywhere else. And although the brand and the product may not be proprietary, the style, the configuration may be.

We've become the launch vehicle for a lot of new products for brands that may have other distribution channels. The difference is we are as powerful a marketing vehicle as we are a selling vehicle.

DF: How has the economy affected your product choices?
MG: Certainly no one has been immune to what's happened. Although we've done better than almost any other retailer out there, the ceiling has come down.

In terms of purchasing and spending patterns, there's been more of a shift to things that save people time or save people money or keep them healthy. The kitchen business has been good. People are cooking at home.

Our fitness business has been good. It's a combination of stress and people not paying for gym memberships.

Our beauty and wellness business continues to be good. Because if a woman has some discretionary income, she is going to want to make herself feel good.

Where you see more of a discerning purchase pattern is in the areas of jewelry, many areas of accessories, etc.

We're seeing a little bit of polarization. (The customer) either wants a really great value -- but still wants great quality for that value -- or she is willing to spend more but it's really got to be very unique or special. There's no need for the stuff in the middle.

We are very careful when we communicate that we're not putting fear in people about the economy. We have a philosophy that there's never any bad news in HSN and that's why a lot of customers come in. We're a respite, we're a relaxation.

But what we will do is communicate the features and the benefits of those products and how it's going to enhance her life. You can't ignore what's happened.

DF: It must have been hair-raising, going into the market in mid-August last year.
MG: We had a celebration exactly one year later. I said: If we can demonstrate that we can do this and we came out of it and we've done well, given the rest of the world and the circumstances -- we have managed the business and managed our cash and our balance sheet and everything else -- there is no question, we can do anything.

Our CFO Judy Schmeling is fantastic. Last summer, we were like Thelma and Louise.

DF: There must have been some sweaty palms around here in December when your shares dropped to $1.40. Now they're around $15.
MG: A lot of (analysts) weren't initiating coverage: Were we media, were we retail?

So what we had to do was as aggressively as possible be out communicating our story, our strategy -- the why, the way, the value of the company and what we were trying to accomplish.

People saw we were managing our cash, we were managing our inventories effectively and we were able to increase our profitability in this more tenuous environment.

We set priorities: Keep our customer, keep our culture, keep our cash.

Read Full Story

From Our Partners