Related News

HomeShop18 opens doors for Korean Companies to enter the Indian Market Homeshopping channels look to raise sales from online platform KIT: The teleshopping market in India Shopper's star Q&A: Paritosh Joshi, CEO, Star CJ Alive

Intrusion Detection Tool

Detect Intruders & Security Gaps w/ GFI EventsManager! Free Trial www.gfi.com/ids-software

Senior Citizen Mediclaim

Get a Quote in less than 1 mins. Min. Premium & Max. benefits. Buy! bajajcapitalinsurance.com/Mediclaim
Ads by Google

The home shopping business is off to a good start. Will it survive the growth of online retail? Last year, Indians spent more than Rs 1,000 crore buying hair dryers, laptops, watches, insurance and mobile phones among hundreds of other products on channels such as HomeShop18 and Star CJ. There is very little data available on the potential. However, if online shopping, usually clubbed with home shopping, is any indicator then things look good. Indians spent about Rs 31,500-odd crore buying goods and services using the net in 2010, according to the Internet and Mobile Association of India (IAMAI). This is serious money. Remember that till three years ago home shopping was a euphemism for TV shows that sold dodgy gemstones and tummy trimmers. Then in April 2008, TV 18 Home Shopping Network, a joint venture between the Rs 2,000-crore Network18 Group and Saif Partners, started operations with HomeShop18. In 2009, it got GS Home Shopping of South Korea in as a strategic investor. By March 2011, the channel had sold an estimated Rs 400 crore worth of mobile phones and consumer electronics among other products. Last year, one of Indias largest media groups, the Rs 3,900-crore Star, partnered with the $1.8 billion CJ O Shopping Co, a South Korean home shopping network, to launch Star CJ. Other Japanese and American firms, which earlier dismissed the market, are now scouting for partners in India. Home shopping has had a great start. The question is, will online retail kill it in infancy? Sundeep Malhotra" height="120" alt="Sundeep Malhotra" hspace="5" width="100" align="left" src="/newsimgfiles/2011/may/15052011/051611_03.jpg" />It doesnt look like it will. Sundeep Malhotra, CEO, TV 18 Home Shopping Network, points to some of the largest global markets for home shopping the US, Japan and South Korea. In the US, for instance, QVC, the biggest home shopping network, remains a $15 billion behemoth without which no brand can operate despite the rise of Amazon and other online shopping brands. In South Korea, the largest broadbanded country in the world, home shopping has grown in double digits for the last three years.

Home shopping, it seems, is here to stay. Here is why. Why shop from home? Non-store shopping says Arvind Singhal, chairman of retail consultancy, Technopak Advisors, is the future of shopping. He explains that while the Indian economy continues to grow, there arent enough avenues for people to spend the money because of the way land usage happens. There is hardly any development of retail spaces in most housing projects. Most private colonies offer golf courses and swimming pools but not shopping areas. Therefore, there is a distortion in the prices of retail spaces in malls, where rents are very high. Now add time poverty read that as stressed out lives with very little time to go shopping. So the whole phenomenon of anytime, anywhere shopping as he calls it is waiting to take off. Home shopping is one aspect of it.

HOME SHOPPING -- GLOBAL SNAPSHOTS Home shopping has traditionally been clubbed with all forms of non-store shopping. These include direct selling, catalogue sales, vending machines, online retail and mobile commerce. Since organised retail itself is a new thing in India, the whole home shopping ecosystem is still developing as the main story suggests. Here is a snapshot of what is happening in key home shopping markets across the world. Much of the information in this box comes from Euromonitor. * In the US, home shopping sales were expected to decline by an annual average of 5 per cent between 2010 and 2015. Much of the decline in both home shopping and catalogue sales happened because internet retailing is growing faster. However, this doesnt mean a loss for home shopping companies, because what they lose on TV, they gain through their websites. * In 2009, shopping through television and catalogues increased by 15 per cent in South Korea as the fear of an HINI epidemic spread. People did not want to move out of their homes into malls and shopping areas. This double-digit growth continued as young people looking for a convenient lifestyle kept hopping on to the home shopping bandwagon. The categories with the best growth remained food (packaged and unpackaged) and drink. Till last year, GS Home Shopping was the leading channel with a 27 per cent value share. GS invested $18.5 million for a 15 per cent stake in HomeShop18 in 2009. * In Brazil, home shopping is growing, but at less than half the rate of online retail. Shoptime from B2W is the leader with a 9 per cent value share in 2009. The reason it leads, say analysts, is because it has always owned a home shopping television channel. Most of its competitors work through infomercials or product placements on other TV channels. This is a bit like what we have seen in India so far. (See main story) Shoptime also has its own private label brands.

The second reason home shopping is growing is the entry of players such as Network 18 and Star. Till they came in there were no 24-hour TV shopping channels selling branded products. Today, almost every news channel and several general entertainment ones carry home shopping shows at unearthly hours. Most usually have faded TV stars selling what look like dodgy products a gadget that sucks oil out of cooked food or beads to restore your luck.

HomeShop18 and later Star CJ have brought respectability, scale and investment into the business which in turn has brought consumers. Malhotra reckons that of all the changes that organised home shopping has seen so far, the most important one is the growing confidence of branded players. An Apple, Motorola and Reebok rub shoulders with an LG, Samsung and a Nokia. Earlier the company had trouble getting a Nokia or an LG interested in selling their products on air because of credibility issues. Plus the regular dealer didnt like the idea of losing a consumer to a TV channel. However, as the volumes started coming in on television shopping channels, the big brands came around. The third reason for growth is the kind of investment that has gone into the backend. The two players together have spent a few hundred crores busting the myth that shopping on TV is about launching a channel; it isnt. It is a combination of a scalable IT and retail business, with a bit of media thrown in. For instance, Home Shop18 currently handles 40,000 calls a day with a captive 800-people call centre. As it reaches further into India through its tie-ups with courier companies the calls will reach 100,000. That means more people, software and hardware to handle these calls. Globally, home shopping retailers spend twice the money that other retailers do on IT systems. They are in that sense just like physical retail shops. The difference between Pantaloon (a large retail chain) and me is not cost structure but the business model, says Malhotra. The biggest cost for a Pantaloon would be rent while it is carriage fees (to cable operators) for a home shopping network. The rest of the operating costs: IT systems, call centre, distribution, could vary in proportion but remain common. The last and perhaps most critical reason why growth has taken off is that both these channels have redefined their consumer. The theory was that home shopping is about serving areas that are not connected or small-town India. What has become evident is that, Small-town is not a place but a mindset and therefore such a consumer is everywhere, in Mumbai, Saharanpur or Dahanu, says Paritosh Joshi, CEO, Star CJ Network. He explains, It is about serving a class of consumers who have the money and the aspiration, but not the confidence to step into a large store and get the kind of service a more evolved consumer gets. We are confident city-bred folks, so we get service when we enter a Shoppers Stop or any other store. This is not the truth of our country. Millions of consumers are still graduating from a position of scarcity to plenty, from non-discretionary spending to discretionary spending. A store makes them nervous, tongue-tied and intimidated. It is the aspirational place they want to be in but are scared to be in. We take the intimidation out of the shopping experience, because you are in your living room and all you have to do is pick up the phone. Malhotra agrees, There are more people with tier 2 mentality in Delhi. A large chunk of HomeShop18s sales come from the metros. This redefinition also includes looking at pricing differently. People who shop from home are not necessarily looking for the cheapest option. Both HomeShop18 and Star CJ claim that they are

selling a lot of high-value products. HomeShop18, for instance, sells LED TVs, iPads, high-end mobile phones, among other things. TV shopping and e-retail On the face of it, TV shopping has an edge over online. Television reaches more than 600 million Indians, while the net reaches only 83 million of them. That means a television channel has a bigger potential market. So far though the net has shown better ability to sell; in 2010, online sales were over 30 times those of TV channels.

BY THE NUMBERS
Home shopping basics Began in (year) Channel reaches (million TV households) Call centre strength (in people) Distribution (in cities) Brands available on air (units) Products available on air (units) Average value of a transaction (Rs ) Turnover (FY 2011 Rs cr)
*estimated

Companies Homeshop18 Star CJ 2008 33 800 3,000 500 2,000-2,500 3,000 400* 2010 14 200 118 130 700 2,000 150*

Source: Companies

It is, however, not a fair comparison. One, because the net has had a head start in 1995. Two, because more than 80 per cent of internet sales in India is travel services (airline and train tickets) and financial products. That means there is no physical product to be delivered. The biggest investment for an online retailer is into firewalls, payment gateways and security. In home shopping, almost everything sold is a physical product a microwave, a watch or a refrigerator. So there has to be a distribution system in place, plus a system for collecting money as well as exchanging the product if the consumer is unhappy. There are other differences in the texture, depth and width each media offers a shopper. Television is limited by time. A company has to maximise revenues by reaching out to the maximum number of people possible in prime time 8.00 pm to 11.00 pm. The net offers the anytime flexibility that Singhal talks about. Eventually though, The net and home shopping are complementary, the net is a catalogue for whats on TV, thinks Malhotra. A web presence does one more thing it acts as a buffer. Much of the decline in TV shopping in the US market is being captured by the websites of the TV shopping channels. Shop some more Home Shop18.com operates out of Bangalore. It is the third largest e-commerce site out of India

in traffic and the fifth largest in revenues, claims the company. Star CJ which already has a website is looking at both mobile commerce and at doing more shopping channels in other languages to reach out to more people. So there is a lot of activity on the investing in the future front. What excites Malhotra most about growth possibilities is services. That is where home shopping has the potential to match or overtake online. Last year, HomeShop18 started selling insurance and DTH services among other products. The net seems like a threat because the Indian market is growing the other way. Globally, catalogues and then TV is what kicked off this market. By the time the net came, most of these businesses had established themselves and all they had to do was migrate online. In India, catalogues never took off, nor did ordering based on newspapers. And TV shopping has just taken off even as all other forms of retail are growing. To get a sense of what is possible just remember what multiplexes did to films or department stores did to food shopping they converted the large consumer numbers India offers into actual revenues in industries which were dogged by fragmentation and chaos. Home shopping has the potential to do the same to the whole area of consumer goods where reach, aspiration and purchasing power never quite meet each other.