Flipping through various television channels late at night, Aryaan Khanna, a busy PR executive, found just what he was looking for: a compact treadmill. And all he had to do was SMS a request to set up a mini-gym at home.
Shopping is no longer restricted to an expedition to the mall, or the local bazaar. Changing lifestyles and communication networks have redefined retailing in India. While shopping websites are targeting the online Indian, some media players are keen to tune into teleshopping, a retail segment that is estimated to be growing almost 35% every year.
To leverage maximum advantage, Essel Group’s Asian Sky Shop and Television Eighteen India Ltd’s HomeShop18 are planning to launch dedicated 24x7 teleshopping channels within a year. NDTV Ltd, too, is expected to launch a separate channel, though the company declined to confirm its plans.
Asian Sky Shop, one of the oldest players in the segment, is convinced that teleshopping is at a take-off stage in India. It expects to close 2007-08 with Rs75 crore in revenue, and is planning a Rs1 crore branding exercise to herald its new channel. “We’re going to brand ourselves all over India, and are planning 10-second and 20-second advertisements,” said Bimal Selarka, CEO and managing director, Asian Sky Shop.
HOW TELESHOPPING WORKS (Graphic)
KEY PLAYERS (Graphic)
For HomeShop18, teleshopping is part and parcel of its retail plans. “For a start, it will be our e-commerce website, and a 24-hour channel later on. We will cover all aspects of retail, involving different forms of technology,” says Sundeep Malhotra, CEO, HomeShop18. His channel is being funded by TV18 and venture fund SAIF Partners.
Currently, there are no exclusive shopping channels in the Indian skies, and teleshopping shows are restricted to a few hours on other channels, usually during “dead hours”, slots when television channels don’t have regular programmes. According to AdEx India, a division of TAM Media Research, home shopping programmes cornered 692,011 seconds over 78 channels in the first six months of 2007.
This segment of retail is likely to see more players as customers across the country get more comfortable with the idea of buying from the comfort of their drawing rooms. “If organized players come, they can definitely make it big,” says Farokh T. Balsara, a partner at Ernst &Young. “The virtual space is a highly scalable domain. The more people jump in the fray, the merrier. And the sooner they come, the better it is,” adds Malhotra.
The story so far
In the past 10 years, this segment has seen more than a dozen players, including TeleBrands India, TVC and MSO IncableNet’s Shop 24 Seven M-Plex. The total turnover is unofficially estimated at just Rs250-300 crore—a tiny fraction of the Rs12 trillion Indian retail industry. But there is no denying the potential: US-based QVC Inc., a home shopping network that focuses on electronic retailing, totalled net sales of more than $6.5 billion (Rs27,300 crore) in 2005.
Electronics are a draw in India, too. Others in the list of favourites include kitchenware, health and fitness-related products and jewellery. “The most popular product is a massage seat. We advertise this for one hour every day,” says Selarka.
On the procurement front, the Indian shopping networks buy in bulk from both local and international manufacturers. Asian Sky Shop, for instance, sources products both from Hong Kong’s JB Group, and its own factory, which employs 650 workers. HomeShop18 is planning to step up the value chain. It will source branded products from companies such as Tanishq, Nike and Philips.
What makes retailing through television attractive is the savings on infrastructure. There is no need to set up numerous shops in various cities, hire an army of salespeople, or transport goods for which there is no demand. Home shopping networks market goods and services directly to the consumer, bypassing retail. These networks purchase air time from broadcasters or cable networks to showcase the product and its uses to consumers, who can phone in to place their orders.
Payments are made usually by cash, credit card, cheque or demand draft. “Ninety-nine per cent of the transactions are on ‘cash on delivery’ basis,” says an executive fromShop 24 Seven India Pvt. Ltd, who asked not to be identified. Many of these items find their way to retail shelves once their television campaign ends. Chain retailers often have “as seen on TV” sections in their stores.
So, are consumers and players ready for the next stage of the teleshopping revolution? With some adjustments, yes. “Consumerism is big and technology has evolved. The only thing is that these networks have to get the execution right,” says Balsara.
HomeShop18’s Malhotra is more upbeat: “The timing couldn’t have been better. Home shopping is retail, it’s entertainment, and also media—all of which are booming.” Infrastructure, customer confidence and the distribution mechanism have improved, he says. “Credit cards are being used heavily. The call centre-customer interface has been rising and is becoming more accepted,” he points out.
On the distribution side, HomeShop’s big plans include a presence across 2,000 cities. “It will be a one-stop shop interface through the infomercial route.”
Such a wide reach might draw more brands to the teleshopping network. “Tanishq, for example, currently reaches only 200-300 cities. We will provide distribution support way beyond their reach,” Malhotra says. “We will be a launch pad for all products. We will test, launch, liquidate products, ensure their reach and recall factors for them.”
Asian Sky Shop, too, is in expansion mode. It has around 100 franchisees currently. “We wanted to target people’s pockets. People are spending more.A lot of chain stores are coming up, and we want to target them, too,” says Selarka.
The segment still faces several hurdles. One bottleneck that teleshopping networks face is advertising expense. A 10-second commercial on television could cost up to Rs3.5 lakh, depending on the time of day and the reach of the channel. This problem, however, will be addressed once the 24-hour shopping channels become functional.
The future of teleshopping is linked inextricably to the reach of television. India has about 112 million television households currently and, according to a PricewaterhouseCoopers (PWC) report, it is expected to reach 130 million homes by 2011. “TV has become an attractive medium. Having 24-hour home shopping channels wouldn’t have been possible two years ago,” says Smita Jha, principal consultant at PWC.
Even now, however, many question the viability of such channels. An industry observer points to the high carriage fees the channels have to pay. “Even for a DTH player, the cost of a transponder will be very high. One would rather carry something which is of everyone’s interest (rather than teleshopping content).”
A spokesperson from Star India, which beams teleshopping advertisements, says such content works during “dead hours”. “They are some sort of revenue, but at concessional rates,” he says.
PWC’s Jha, however, believes that teleshopping channels can break even. “Such channels should go in for alternate programming; content should be good so that viewers would like to watch the channels. It has inherent advantages for the retail industry,” she says. If these channels are able to attract good viewership ratings, advertising revenues could add to their bottom line. “Advertisement revenues will form a part of it (our plans),” says Malhotra.
Another aspect the teleshopping networks are banking on is the margins of scale. “Once your turnover goes up in this business, the costs go down. Profit margins are 10-15%,” says Selarka.
Apart from the interface with the customer, teleshopping networks are working to upgrade content and products, too. As Balsara says: “Currently, the quality of programming and products are not up to the mark. For that matter, the logistics need to be right.”
Industry analysts believe networks need to improve the quality of products and their range. Currently, only certain kinds of products are available on home shopping.
“Their products are still not comparable to hypermarts. They’ll only succeed if their product range is good and pricing less. That will be convenient for customers,” says Mazyal Kotwal, associate director at accounting firm KPMG.
Lower prices can be one of the key advantages networks can offer customers. “Marketers can save costs incurred on conventional marketing through various marketing channels, boost their sales and pass on the margins saved, as discounts, to customers,” explains Kotwal.
Better programming will go a long way in improving consumer confidence. “Consumers are finicky with the touch and feel elements to it (products). They need to have better product catalogues and credibility. Once they become credible, advertisers would definitely follow. It’s a combination of numbers and credibility,” says Shashi Sinha, chairman, Lodestar Universal Pvt. Ltd, an arm of the global marketing communications and marketing services company Interpublic Group.
Agrees Selarka: “Because of some companies, people have lost confidence (in teleshopping). They make promises that are just not possible.”
To ensure credibility and efficient delivery, HomeShop18 plans to have a “highly professional” back-end system, customer relationship management (CRM) and vendor management. “Our call centre will be monitored by trained salesmen; we’ll be able to track and monitor products up to the receiver’s end. And every product comes with a guarantee,” says Malhotra.
One of the ways Asian Sky Shop has tried to cultivate customer confidence is through franchisee outlets. These outlets, numbering more than a hundred, allow prospective buyers to “touch and feel” the products advertised on TV. This, however, adds to the cost of products.
Says HomeShop18’s Malhotra: “We will not have franchisee stores. We will oversee up to the last mile. We have no intention of leasing the last mile to other people.”
(Rahul Bhatia contributed to this story.)