MEXICO CITY — In the U.S., celebrity names can drive product sales. In Mexico, those same names can be a liability.
That was the case with Joan Rivers, whose jewelry has rung up sales of $20 million on QVC in the last three years. When CVC Telemercado Alameda presented the Joan Rivers jewelry collection, “no one wanted to buy it,” said Francisco (Paco) Cortina, president of the four-month-old Mexican shopping channel, which is 50 percent owned by QVC.
Then a CVC merchandising manager had a marketing epiphany: Mexicans don’t know the popular American comedian, so CVC took Rivers’s name off the jewelry. It became a hot seller.
“We are learning this business,” Cortina said. “We are just scratching the surface. Sales are in line with expectations, but we believe they could be better.”
Cortina declined to discuss sales figures, but QVC’s fourth-quarter earnings included a pretax charge of $9.3 million related to losses on joint ventures in Mexico and the U.K.
The network reaches 50 million homes. It has 100,000 customers, many of whom are repeat buyers and half of whom are credit card holders. Only a fraction of the Mexican population — 3 million out of 85 million — have credit cards.
CVC’s parent company, Grupo Televisa, is bullish on home shopping in Latin America. It plans to launch channels in two South American countries this year, but Cortina would not disclose which ones.
The eventual goal is to cover all of South and Central America, as well as Spain and Portugal. Grupo Televisa’s signal is so strong, it transmits CVC to other Latin American countries. CVC has received calls from Colombia and Guatemala, but is not equipped to ship there.
The company wants to gain a foothold in South America before the invasion of competition as a result of the North American Free Trade Agreement.
“NAFTA is forcing many decisions,” Cortina said, predicting that other shopping channels will be launched as trade barriers are dismantled. “It’s a matter of getting a presence. The sooner, the better.”
CVC has gradually weaned itself from QVC as the supplier of all its goods. It now receives only 20 percent of its products from the West Chester, Pa.-based shopping network.
CVC’s staff of merchandise managers source products worldwide, with Mexican items featured in the mix. Jewelry is the top seller, followed by electronics, kitchen supplies, gifts and housewares.
For the time being, CVC is not selling apparel, footwear or cosmetics.
“We are not ready yet to jump into fashion,” said Cortina, a former president of Procter & Gamble in Mexico. “We have to learn a lot of things first. We are not completely aware of what [Mexicans] are looking for in terms of fashion.”
Cortina said CVC offers products with a range of prices to appeal to people at all income levels. Religious medals and decorative boxes sell for as little as $15, while CD players and exercise equipment cost hundreds of dollars.
Despite extensive product testing with focus groups, it’s difficult to say what will sell.
“A lot of products I wouldn’t give a chance to at all have sold very well,” said Timothy Hopkins, QVC’s vice president for international merchandising, who is a member of CVC’s buying team.
“We’re looking for things that haven’t been sold in Mexico,” said James Preston, director of sales. For example, 10,000 units of “the world’s smallest radio,” a device that fits in the ear, were sold in three days for 59 pesos — $19.60 — each.
Preston recalled that he and Hopkins scoffed when Miguel Campuzano, CVC’s sales manager, was keen on silver “sauna suits” made of synthetic fabric. The suits are worn during exercise and induce sweating. Campuzano ordered 1,000 of them. The suits, priced at 39 pesos, or $12, immediately sold out and Campuzano has reordered four times.
CVC is also learning how to convince Mexicans to buy from television. Although the format looks much like QVC, Cortina has asked producers to make the shopping environment more entertaining — to “tropicalize” it for the more relaxed Latin lifestyle, an atmosphere he thinks is more appropriate to shopping than hard sell.
An average product on CVC costs between $70 and $80, which may dispel Wall Street skepticism that the majority of Mexicans don’t have the discretionary income to make the channel a success.
According to demographic surveys, 85 percent of Mexico’s population, or 71.6 million people, are in the “subsistence” income category. They shop at the country’s numerous black-market bazaars or buy from street vendors. Middle-class Mexicans, who make up 13 percent of the population, or 10.96 million people, earn $13,000 to $50,000 annually and shop at department stores and boutiques, as do the remaining 2 percent, or 1.69 million people, with incomes over $50,000.
Aside from identifying the desires of a country where shopping malls and catalogs are still aberrations, CVC faces other challenges, such as delivering merchandise and arranging for payment from customers without credit cards.
CVC has contracted with two local parcel services that guarantee delivery within 10 days, for an average cost of $5. Customers who don’t have credit cards have to make deposits to pay for their orders at branches of Bancomer, a bank where CVC maintains an account. CVC will ship the goods only after receiving confirmation from the bank that a deposit has been made.