While the challenges for Indian television’s home shopping channels pile on amidst talks of consolidation and the growing e-commerce pie, how are players scripting their growth?
The television home shopping industry in India has come a long way since its inception in the ‘90s. The segment was then associated with ‘magical’ products, impractical promises or dubbed English slots. Over the years, players have dabbled in content innovation, enhanced ways in which people can be engaged across channels and introduced new categories. Thriving on its unique video-based format, explaining and assisting customers in their purchases, the segment saw a mushrooming of channels like HomeShop18, Best Deal TV, DEN Snapdeal TV and Gemporia, amongst others. However, internet retailing or e-commerce brought with it various elements that challenged their game.
Discounts, quality of products, easy transactions, etc have taken away a certain portion of the consumer base from home shopping. In the last year, one has seen several players giving in to the challenges of doing business and shutting shop. Amidst this is also talk of consolidation, with buzz around HomeShop18 acquiring Shop CJ. While one may think the end of TV home shopping in India is near, players in the space are holding their own and scripting strategies for growth even as the pace slows.
Shabori Das, senior research analyst at Euromonitor International states, “Home shopping is expected to increase but the growth expected is set to be quite slow as it is already a mature retail channel. Thus, it is becoming more difficult for home shopping channels to attract new consumers.”
The TV home shopping business in India is one of scale needing high investments in quality content production. But a major challenge has been from the investor community, which has treated e-commerce and home shopping at par, state players. Manu Agarwal, founder and CEO, Naaptol states, “We need to adapt. The boundaries between all retail formats will collapse, so we need to play on our own strengths as a video business. E-commerce may be 10 times bigger than us in GMVs, but in terms of losses it has more of those than us. We need to improve our ‘look to book’ ratio through the introduction of new products, etc.” If 500 people are watching the channel, one is buying; in the US, this ratio is 10:1, he adds.
Data from Euromonitor shows that TV shopping remained the dominant format in home shopping in 2016 with a majority of players advertising their products on standard television channels after 11pm. Dhruva Chandrie, COO, Shop CJ mentions that on a global scale, the home shopping industry enjoys a big stake in the retail pie and that is a reflection of people’s buying preferences.
“We are looking at strengthening our fashion proposition by releasing plenty of in-house labels, and have collaborated with distinct designers to curate a more contemporary collection that is commercially viable too,” says Chandrie. Simultaneously, Shop CJ is fuelling variety by creating shows that sell value travel offerings among other new categories. In fact, it has introduced categories like travel and insurance with a few more in the pipeline.
Prospering on the COD (cash on delivery) model, most players faced a tough time late last year due to demonetisation. While Shop CJ saw a 30% drop in sales in the initial two months, Naaptol faced an impact of 25% on sales. But players activated card payments on delivery along with aggressive wallet payment adoption. With metro cities accounting for a majority of e-commerce business, home shopping channels started focussing on regional markets, particularly Southern states. Regional markets contribute 20% y-o-y for Shop CJ, while almost 40% of Naaptol’s business comes from Southern states.
“The overall market is growing but it is facing greater challenge from e-commerce,” states Girish Menon, head of media and entertainment at KPMG India. “Earlier, the focus of e-commerce companies was tier I cities but over the last two years, the focus has shifted to tier II cities, therefore posing a challenge for TV home shopping as they are now fighting for the same consumers.”
Moreover, GST could be a cause for concern going forward as a lot of vendors are small and local, and compliance with GST could prove challenging for them. Functioning on an inventory based model along with a marketplace model, around 99% of revenue for home shopping channels is derived from commission from sales while 1% is from a fixed fee charged to brands. Another strategy that works for home shopping channels are festivals/special occasions, etc which ensure close to 30-60% surge in sales. “Fundamentally, we need to move away from that mindset. We are a retail concept and for us to do discounts/offers for a long period of time is death,” believes Agarwal.
In countries like the US and South Korea, e-commerce is a strong proposition but TV home shopping continues to grow. Experts believe the same will happen in India as well but the pace of growth will be slower.
Unconventional retail therapy
Size of home shopping market in India: Rs 5,400-6,200 cr
Growth expected: 15-20% over the next 5 years
Market: HomeShop18, Shop CJ, Naaptol and TVC Skyshop account for almost 80% of the market
Popular categories: Consumer appliances, apparel and fitness, weight loss
Source: KPMG India