Lights, Camera, Sell

Daniel Kiviat is a courteous and fastidious gentleman who designs clothing for the so-called forgotten woman. His specialty is comfortable garments, immune to the tastes of the day, that in his words “cover you everywhere you want to be covered.” They’re exactly the kind of ensembles one might expect to find on a home-shopping network. That was why Kiviat was one of the first people fired when Mindy Grossman took over HSN.

Grossman, now 55, became CEO of the TV station cum mall in 2006. She was the eighth boss in 10 years and–despite the fact that the home-shopping customer base is 80% female–the first woman. In the past six years, HSN has grown from a dowdy backwater that hawked items of questionable utility and origin to a vibrant online destination with enough juice to demand that manufacturers make products in colors exclusively for its customers.

With sales of about $2.2 billion last year, HSN is not the juggernaut that Amazon and eBay are. It’s not even a third as big as rival QVC. But its share price has trebled since it went public four years ago and has risen almost 40% in the past year. Its customer base is highly engaged, with the most loyal ordering 36 times a year. Unlike other online shopping portals, it has video. If retail’s holy grail is to make online shopping more communal–to harness the power of friendship in the cause of commerce–HSN is in a sweet spot.

When Grossman took over, Kiviat’s line, named Maggie Sweet, was the channel’s biggest apparel seller, moving more than $22 million worth of garments in his last year on the air. Then again, it didn’t have that much competition. A brand on HSN was in the reality-show phase of its prestige arc. The network had one bona fide celebrity pitchman (the ubiquitous Wolfgang Puck) and a reputation for cutting a swath through the credit cards of lonely shut-ins and hoarders. The place was making money, but it wasn’t making customers.

Six years later, the airwaves out of the St. Petersburg, Fla., studios of HSN are saturated with big names, from J. Lo to Serena Williams, from Randy Jackson to Emeril. It’s not just celebrities: British vacuum manufacturer Dyson, the Museum of Modern Art’s Design Store and fashion labels Badgley Mischka and DKNY have all been bitten by the HSN bug. In March, Lionel Richie held a miniconcert at HSN’s studios to kick off Tuskegee, his first chart-topping album in more than 25 years. Oscar-winning costume designer Colleen Atwood launched her first clothing line there. HSN still sells weird items–Kathy Najimy’s line of Ch’Arms, tops that cover your arms but not your chest, springs to mind–but they are the exception rather than the norm. (Perhaps in response, QVC has gotten into the celeb business too. Its most recent recruit is Jennifer Hudson.)

How did a first-time CEO with no experience in television or direct-to-consumer retailing turn HSN around? It was pretty simple, really. She just got everybody to think in a whole new way.

Grossman is not a power-suit kind of CEO. She does not cultivate a macho image. She’s a fan of chunky, colorful jewelry and high heels. She sends a lot of gifts, often Huggable Hangers, which are more useful than they sound and which she considers something of an HSN gateway drug. She has an immaculate Oprah-visit-worthy country home in upstate New York, and she loves to entertain. “Mindy is all work, but she’s a girl’s girl,” says Stefani Greenfield, who was an HSN regular until she became chief creative officer of the Jones Group, in an interview she conducted from a Jacuzzi in Malibu, Calif. “She’s an amazing cook. She has a vegetable garden where she grows eggplant and squash.”

It was while cooking that Grossman had her retail revelation.

At the time, she was vice president in charge of global apparel at Nike. She had spent the previous half-decade spreading the gospel of aspirational athletic apparel across the globe, spearheading the company’s presence at the Beijing Olympics and juicing up its women’s business. “I worship at the altar of [Nike CEO] Phil Knight,” says Grossman. “Working for him was my M.B.A.” But she was stuck. She wanted to run something, and she knew it wouldn’t be the Beaverton behemoth.

Her move to Nike had surprised friends; her background was pure fashion. Grossman had been in on the ground floor at Tommy Hilfiger before becoming president of Ralph Lauren’s midprice department-store brand Chaps and then pretty much creating the Polo Jeans line, taking it from a standing start to a $450 million business.

Then again, subverting people’s expectations is something of a habit of Grossman’s. It must have been quite a phone call, the one Donald and Elaine Waldman, a produce dealer and homemaker on Long Island, New York, took from their beloved only adopted daughter in 1977. She was not going to law school, she explained. She was not going to marry the nice high school boyfriend to whom she got engaged at 19. After not only becoming the first member of her family to go to college but also skipping a year of high school to get there, she was going into fashion. “When I got my first VP title at 26,” Grossman recalls, “my parents finally stopped asking when I was going to get my law degree.”

She’s Going Where?

As she began to bump the ceiling at Nike, Grossman heard that Barry Diller was looking for someone to head IAC’s retailing business, made up primarily of HSN and a high-end catalog company, Cornerstone. Dubious about her suitability for the job, she began watching HSN as she cooked (Puck was on), flicking back to one of her favorite cooking shows. And it hit her. What if HSN offered more lifestyle programming, only with all the products for sale? It would be as if Rachael Ray actually sold the extra-virgin olive oil she was drizzling over everything while operators stood by. She took the idea to Diller, and he bit.

Grossman’s doubts about her fit for HSN were slight compared with the echo chamber of dismay that surrounded her as fashion colleagues digested her move from one of the hippest companies in the U.S. to one of the most mocked. “People were awful,” she says. “You ever have that feeling when you know people are talking behind your back, but you can’t turn around? There was so much whispering.”

Not everybody at HSN understood the appointment either. One of Grossman’s opening moves was the standard ploy of a house-proud woman who arrives to a state of disarray. She cleaned up. Not just by ushering old-school types like Kiviat off the air–“She’s not my favorite person, but you don’t need to feel sorry for me,” he says from his home in Washington. “I made a ton of money”–but by actually scrubbing buildings. She had all the white walls of HSN’s tree-dotted campus power-washed. And she threw out all the old chairs and bought everyone a new Aeron. “I got 100 e-mails about the chairs,” she says. “It told them that someone was investing in people.”

These were just the outward signs of the sprucing up she was trying to effect at HSN. It helped enormously that she was female, not just because most of her customers were but also because of who her friends were. Grossman needed better things to sell, and her girlfriends came through.

She and Greenfield had socialized for years; their husbands are even tighter. Greenfield was the brains behind the Scoop NYC chain of stores, one of the first to offer a tightly curated range of clothes, as if selling the contents of an extremely hip person’s closet. She had televised one of Scoop NYC’s sales and witnessed firsthand what sell-a-vision could be like. When she heard what Grossman was doing, she was the first to get on board; she persuaded some of the lines Scoop sold to give HSN a whirl. “Everybody thought I was crazy,” says Greenfield. “I said, ‘If you believe in me, believe in what’s to come.'”

In a way, the celebrity part was the easiest. Selling on air is a natural fit for celebrities: they do what they normally do–look at cameras and talk about themselves. But Grossman knew that brands also have a tale to tell. This had been one of her frustrations in dealing with retailers in prior jobs. “The story was getting diluted, whether it was a technology story in the case of Nike or a thematic story in the case of Ralph,” she says. “You lose control.”

These stories needed the right context, so she hired a former British DJ to run the studio, which he fitted with sets that whispered of chat show rather than screamed of product demonstration. To give the programming more of a lifestyle feel, Grossman lured in Bill Brand, who had worked at VH1 and Lifetime.

It seems to be working. So far this year, sales are up 4% over the same period last year, when they were up 2% over the year before. Since 2009, profits have climbed more than 22%. The number Grossman hasn’t been able to improve is returns: about 20% of buyers send their purchases back, even though she has a much tighter hold on quality control. (Potential vendors are always impressed by the drop test, in which a huge machine drops a product several times in its shipping packaging to see if the contents break.)

Buying from Friends

More important, HSN has seen a way forward. A third of its customers now purchase online rather than over the phone. HSN has tried to capture more of this market with online games and prizes for people who engage in mobile chats during a live broadcast. The games are pretty dreary, but the company says they’ve been played 60 million times. Next to Amazon or eBay, HSN’s online presence is still that of a tiny boutique on a lightly trafficked street. But this boutique has a handy gimmick: video.

Customers like to be able to see products in use. HSN broadcasts live 24 hours a day, so there’s oodles of content for them to watch. And when they click on a video, they’re entering what feels like a nationwide Tupperware party. Famous guests are interspersed with HSN regulars, and everyone is telling stories. Former model Stacey Schieffelin appears with no makeup and then applies it on air, teaching customers how to do it–and selling what’s she’s using–as she goes. Jay King styles himself as the Indiana Jones of turquoise, telling tales of far-flung mines as he peddles chunky jewelry. The impressively mustachioed Antthony (not a misprint: two t’s) enumerates the inspiration behind every single floaty top he has designed (“I was in Paris looking for lace doilies, which I collect”) while explaining how to make the look suitable for church.

Being able to watch videos of these characters simulates the feeling of buying from friends–weird, slightly obsessive friends. Many of HSN’s customers are still forgotten women who don’t feel comfortable buying in public. HSN codespeak is that its clothes are democratic. Offering these women a community to spend with has always been home shopping’s strength. Grossman just made HSN’s party a lot cooler.