QVC and HSNi have joined the rush to greater scale.

In the wake of a string of deals by Wal-Mart and Amazon Inc., the nation’s two largest home shopping channels, each with mainstream appeal and growing digital businesses, have now decided marriage is better than staying separated.

QVC and HSNi have competed furiously for decades. Yet their union — through a $2.1 billion all-stock deal revealed Thursday — is seen as bringing together two relatively compatible firms with similar business models but distinct cultures and category strength. The deal is expected to position the combined company to accelerate innovation, optimize programming, take advantage of greater scale and cut costs. The challenge will be to share best practices without homogenizing the businesses.

It’s also widely seen as a maneuver against the growing dominance of Amazon, though officials at QVC suggest that the online behemoth wasn’t the primary motivation for reaching a deal. By putting the two businesses together, there is the potential for cross-marketing to existing customers, so possibly they shop both companies instead of just one, and to get them to spend more time and money with the brands. In addition, there’s increased “financial optionality” due to HSNi’s lower debt leverage.

“In a world where a lot of e-commerce is very transactional, where you just get in, get out, we can win by providing highly differentiated, curated experiences founded on deep customer engagement, meaning high loyalty and high purchase frequency,” Mike George, QVC president and chief executive officer, told WWD on Thursday, just after QVC Group parent Liberty Interactive Corp. unveiled an all-stock deal to acquire the 62 percent of HSNi it does not already own. The deal gives HSNi an enterprise value, which includes stock and debt, of $2.6 billion.

Asked if Amazon’s ascension spurred the acquisition, George said, “It was less related to Amazon and more about focusing on what customers will want three to five years out and creating new ways to engage with them.” He also cited the stock price as adding to the appeal of a deal.

Victor Anthony, an analyst at Aegis Capital, said acquiring HSN would add scale to QVC’s model, which doesn’t have the weight of brick-and-mortar stores and sees only about 1 percent of revenues go to advertising. That gives the home shopping model margins that are relatively high compared with other retailers.

“They do have some advantages over traditional retailers, but when it comes to Amazon, it’s a different story,” said Anthony, who has had a “buy” rating on Amazon for more than five years.

But while he said Amazon’s Prime membership program and its free shipping benefits could pressure QVC to lower its own shipping costs, Anthony noted Amazon wasn’t so much a direct competitor with the company.

But Amazon has certainly taken notice of QVC and HSN.

The web giant last year launched Style Code Live, a live-streaming style show that borrowed heavily from the QVC and HSN model and sold apparel directly from Amazon’s platform. The show was scuttled this spring, but Amazon is known for pushing forward to gain competitive advantage, even if it means a failed effort or two.

“In the retail world, consolidation is the biggest key to staving off the overwhelming threat that Amazon has brought to the industry,” said Tom Caporaso, ceo of Clarus Commerce, which helps brands connect with consumers online.

“With a merger of two major established brands, the converged company will now place as the third largest e-commerce retailer in the country, which will put them on center stage in the fight for dominance,” Caporaso said. “If HSN and QVC can build a premium loyalty program such as Amazon Prime to rival the online giant, then they will be a major force to be reckoned with, especially since they already have large customer bases.”

Liberty already owns 38.2 percent of HSNi and will buy the remainder in an all-stock transaction that values HSNi’s shares at $40.36 each, representing a 29 percent premium over the closing price on Wednesday.

Shares of HSN quickly rose 26.8 percent to $39.70 Thursday, nearly matching the buyout valuation, and QVC’s stock slipped 1.2 percent $24.16. The deal, which is expected to close in the fourth quarter, will leave non-Liberty shareholders with about 10.6 percent of the combined company.

“Joining the QVC Group will give us instant access to global consumer markets, a leadership team with deep expertise and a global perspective, and the opportunity to further strengthen our content-based brand portfolios in a changing retail landscape,” said Arthur C. Martinez, HSNi’s chairman. “We have both been innovators in a growing and dynamic retail environment with a unique vision of what shopping should be, and as new technologies continue to change our everyday lives, together we can develop the next generation of shopping for the next generation of consumers.”

QVC has owned at least 30 percent of HSN since 2009, but Maffei said the time for the deal had come, given stock prices at both companies and that “management changes at HSNi also provided near-term catalyst or opportunity for change.”

Two and a half months ago, Mindy Grossman stepped down as ceo of HSNi to join Weight Watchers International as president and ceo. She grew HSNi and raised its profile to become a $4 billion lifestyle network, in the process launching several digital innovations and forming partnerships with brands and celebrities from different fields. QVC has been stepping up its own profile, including the launch of the Ellen DeGeneres lifestyle brand in 2014, Liberty’s 2015 acquisition of the deal-orientated e-tailer Zulily for $2.4 billion and the introduction last year of the home shopping channel Beauty iQ. Coming this September is a Martha Stewart apparel, accessories and beauty brand.

Asked if Grossman’s departure had anything to do with the impending deal, George replied, “No. There was really no connection.” He’s taking over for Grossman and will lead HSNi while continuing to head QVC.

George said QVC and HSN will maintain their separate teams and separate brands. “So from a customer viewpoint, they will enjoy QVC and HSNi as they always have.” QVC is based in West Chester, Pa., and HSNi is based in St. Petersburg, Fla.

“Behind the scenes, we will leverage our combined capabilities — how do we program those five networks to maximize customer choice and offerings,” George said, referring to QVC, QVC2, Beauty iQ, HSN and HSN 2. “By combining forces we can innovate together, provide new mobile experiences, personalization and next generation technologies like conversational commerce, while still offering the separate brands. There is a lot we can do together.”

With a total of more than $14 billion in revenues, QVC and HSNi, he pointed out, combined becomes the third largest e-commerce business in the country, next to Amazon with $97.8 billion in online volume, and Wal-Mart, with $15 billion in online sales last year, according to eMarketer.

George cited both companies for customer loyalty and repeat purchasing, with QVC particularly strong in fashion and beauty, while HSNi’s strength lies in electronics, fitness, health and wellness.

QVC’s revenues, excluding Zulily, tallied $8.7 billion last year, with home making up the largest part of the business (33 percent of revenues), followed by apparel (19 percent), beauty (17 percent), accessories (13 percent), jewelry (9 percent) and electronics (9 percent).

HSNi is also heavily skewed toward the home, but has a smaller proportion of apparel. Of the company’s total revenues of $3.6 billion last year, $2.5 billion came from HSN, which was mostly made up of home and other goods (53.5 percent of sales), beauty and health (23.3 percent), apparel and accessories (15.3 percent) and jewelry (7.9 percent). Cornerstone accounted for the balance of revenues.

“It’s very important to maintain the distinctive brand identities,” George said. “They will have very distinct vendor portfolios.”  QVC’s capabilities in product design, development and sourcing can be applied to create strong private apparel brands at HSNi, a la QVC’s Denim & Co.

While web giant Amazon is expanding into brick-and-mortar retail with its $13.7 billion deal to buy Whole Foods, George does not expect to expand into traditional brick-and-mortar retail.

“It’s definitely not a focus for us,” he said. “The one exception is the Cornerstone family of brands that will be part of the QVC Group,” which has a limited number of showrooms in its portfolio. Cornerstone is comprised of “interactive, aspirational home and apparel lifestyle brands,” including Frontgate, Ballard Designs, Garnet Hill, Grandin Road, and Improvements. Cornerstone operates separate e-commerce sites for all the brands, distributes more than 325 million catalogues annually and has 11 retail and outlet stores.

On the international front, “We don’t necessarily see international as a high priority, though we have a good international presence with QVC and Zulily is looking to expand,” George said.

The merger will lead to layoffs and back office efficiencies, he admitted. “There will be some headcount elimination as we move forward, in areas of overlapping activity at the corporate level or support areas,” George said, adding that it was premature to specify how many jobs would be affected.

Although QVC and HSN will operate under their own brands, there should be plenty of opportunities for the two to work together, strengthen partnerships with brands and open up new opportunities.

On a conference call with analysts, George pointed to “extending top HSN brands to QVC International and Zulily, leveraging Zulily to drive younger customers to HSN in addition to QVC and utilizing QVC’s global product development capabilities to enhance HSN’s brand portfolio.”

Beauty players on both networks voiced excitement about the deal’s international and demographic growth opportunities.

“It increases our opportunity to reach more customers through the QVC relationship,” said Greg Renker, cofounder of Guthy Renker, which has sold brands on QVC for more than 20 years. “We have been very loyal to QVC for many years. The fact that we now might be able to take new products to HSN and have it considered to be part of the family is a wonderful opportunity for us.

“The scale of television is still extraordinary, and we worship at the altar of television’s success,” Renker said. “Digital is less scalable for us — for us, digital has historically been an order-taking rather than an order-making channel. But that is changing, and we are getting better and better at order-making — i.e., creating customers versus just having created them on television and then they order digitally.”

The distinct demographic differences between the two networks is seen as a plus for the brands.

“This merger can really fuel growth by bringing HSN’s viewer into the QVC fold,” said Suelyn Farel, ceo of the Julien Farel products business, which sells on QVC. “A wider audience attracts new beauty fans and continues to build the Julien Farel brand halo, which…ultimately translates to an increase in sales for both us and the network.”

Kathy Van Ness, chief operating officer of Golden Door, which sells skin care and food on HSN, noted, “This is a changing retail world, and we have to become much more creative about how we find and target consumers.”

And ScentInvent Technologies cofounders Abby Wallach and Caroline Fabrigas said the deal should provide them with “global distribution with access to a diverse audience,” as well as “multichannel touch points for on-air and online content and commerce.”

One beauty industry observer noted: “HSN and QVC have complementary viewing audiences and their assortments are largely driven by the disparity in that consumer base. You do see a distinct difference between a QVC brand and an HSN brand in terms of their consumer appeal.”

Allen Burke, who transformed QVC’s beauty business during his tenure from 1997 until he retired in 2011, said, “People have been expecting this to happen for the last 15 years.”

Now, working as a consultant, he took a long-term view of the merger proposal and pointed to HSN’s cache of video material.

“Today you have to have video assets to utilize all of the platforms. There are some obvious economies of scale,” Burke said. “When I got there in 1997, they were just starting to get on to the Internet. Today it’s half of their business. Down the road, if television viewership continues to decline, [QVC executives can say] ‘I’ve got the assets, I can make the organization a little leaner and I can focus those assets on different channels in a more forward thinking way.’”

Burke added, “They are putting more assets now into QVC 2 and Beauty IQ, so they are experimenting with other channels of the broadcast signal and it’s leading them to think, ‘This could all come together.’”

On one level you have to ask “what took them so long,’” he continued. “As bricks-and-mortar got softer and softer, people did keep watching more and more television for a very long time. The business has great strength.” But TV viewership is eroding, Amazon “is a force to be reckoned with” and QVC and HSN have a lot of assets, a lot of understanding on how to present product and bring it to life, he said.

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