Teleshopping firms like Shop CJ Network, Homeshop18, Naaptol, etc, will probably end 2016-17 in the red. Moreover, their sales are likely to be under pressure for some time more given the onslaught from e-retailers. Already, demonetisation has hurt business over the past few months and is yet to revert to the mean.
Manu Agarwal, founder and chief executive officer, Naaptol, told FE that his firm’s losses in FY17 would be higher at around R120 crore compared with R91 crore in FY16. Sales, he said, dipped considerably due to demonetisation. “We should do better in 2017-18 thanks to cost-cutting measures like decentralising distribution centres which would reduce logistics costs by around 25% from R200 crore in 2015-16,” Agarwal added.
Naaptol Online Shopping’s losses in FY16 at R91 crore were higher than the R46 crore reported in FY15. However, revenues rose 56.4% to R446 crore during this period. Dhruva Chandrie, COO, Shop CJ, said that demonetisation had caused a near-25% drop in sales and consequently the firm would end FY17 in the red. “We are launching more regional channels,” Chandrie told FE, adding that the Tamil and Telugu channels, launched a couple of years ago, continue to burn cash.
Losses at Shop CJ Network widened to Rs 142 crore in FY16 from Rs 86 crore in FY15 while revenues rose marginally by 2.7% to Rs 579.74 crore.Network18 Group’s Homeshop18 too posted losses of Rs 84.2 crore in FY16, although these were smaller than the losses of Rs 174.9 crore in FY15. The company saw a 13% drop in revenues to Rs 390.4 crore in FY16.
“Losses in the approximately Rs 5,000-crore teleshopping industry is expected to increase in FY17, as teleshopping firms continue to offer steep discounts to boost sales trying to compete with the online players,” said Technopak chairman Arvind Singhal.
Pinakiranjan Mishra, partner and national leader, retail and consumer products, EY India, said, “The main challenge for teleshopping firms is that most of the products they sell are now available online, unlike earlier where the products were available only with them. E-commerce penetration in Tier II and Tier III cities has further resulted in erosion of their business.”
While teleshopping also follows a marketplace model, their visibility is restricted to certain time slots unlike online e-commerce channels where consumers can shop online at any point of time. To effectively compete with online players, they will have to increase their visibility either by becoming full-fledged online players or establishing shops.
“Only focusing on teleshopping is unlikely to help them turn profitable,” Mishra said. Another handicap faced by these firms is that consumers generally flip channels the moment the teleshoppping ads start, so they lack stickiness.