What?s Selling on tv?

What do you do when you run short of atta, dal, chawal, milk, eggs or bread? You pick up the phone and call your neighbourhood kirana shop, and the stuff gets delivered to your door free-of-cost, right? And if the milk is spoiled or the dal different from the variety you ordered, you can have it picked back, no questions asked, right?

Now imagine you can do all this and more not through a phone, but with your television set remote. And we are not talking of low-value commodities like atta, dal or chawal, but big-ticket items?electronics, jewellery, clothes, kitchen appliances… you name it.

Tune in to HomeShop18 TV, the country?s first 24-hour home shopping channel from Network18 Group, where you can compare brands, check prices, order and pay only on delivery or through credit card, with guaranteed 15-day return policy. And the deals are at least 20% to 50% cheaper than those available at the physical stores.

The channel?launched in April last year?and beamed to cable and satellite TV channels in 5.5 million homes deals in 300 brands (20,000 stock keeping units) in 20 categories that can be delivered to customers in 2,300-odd cities.

And there are takers for this new shopping mode, as despite the channel?s limited reach of 5.5 million (out of 65 million satellite and cable TV homes) in the total television market pie of about 100 million homes, it has begun to do transactions worth Rs 20-25 crore every month, gaining one customer every 12th second, according to Sundeep Malhotra, CEO of HomeShop18. Quizzed further, he adds that the margin in the business is 20-30%, 80% of which he claims, gets passed on to customers as discounts.

?In the US, home shopping is a $40-billion industry dominated by big retailers such as QVC Network and Home Shopping Network. In India, thanks to our unfortunate initial brush with a few fly-by-night telebrands, the industry got a bad name,? rues Malhotra.

Therefore, to avoid being tarnished by the same brush, the channel has consciously stayed away from the category of tacky sauna belt ads, dubbed in poor Hindi, featuring foreign models that run ad infinitum sparking no interest in the viewers.

?We deal only in real brands that are also available at physical stores,? informs Malhotra. That the market for home shopping must be large can be gauged from the fact that recently, Rupert Murdoch?s Star Network announced a 50:50 joint venture?between STAR CJ Network India and Korean home shopping giant CJ Home Shopping?that plans to launch a second 24-hour home shopping channel in India later this year. Star India?s spokesperson refused to comment on this development, except citing CEO Paul Aiello?s statement to the press that ?we are truly thrilled to work with CJ Home Shopping in launching a world-class home shopping channel in India.?

Meanwhile, private equity firm Saif Partners has upped the ante last year and approved a second round of funding ($16 million) for HomeShop18, raising its stake in the channel from 25% to 35%. The first round of investment was $10 million and the latest capital infusion is for building capacity and later march into the direct-to-home sector. The channel is hoping to break?even in the next six to eight months, despite the slowdown.

Till such a time that the Star venture takes off, competition to HomeShop18 is mainly from the e-commerce sites. The 10-year-old e-commerce revenues are estimated at Rs 500 cores (Rs 1,105 crore, if you club revenues of both retailers and auctioneers, according to the Internet and Mobile Association of India), whereas in just one year, HomeShop18?s transactions may cross Rs 300 crore by the end of this financial year (2008-09), according to Malhotra. Both these virtual shopping channels (internet and TV) are, however, very small compared to the size of the offline organised retail industry that is valued at around Rs 78,400 crore, according to the India Retail Report 2009.

But this is because the home shopping category is still new and nascent in India. ?The dynamics of the market were so unclear that we had no clue about the demographics or where our sales would come from,? reveals Malhotra. So the first blunder was discovered when the channel went all out into the non-TAM (a measure of television viewership in India that covers 23 cities) tier II and tier III cities simply because the carriage fee there was lower than in the metros.

?Later we discovered that a bulk of our sales were originating from the metros and not from the hinterland, as we had hopped would be the case,? says Malhotra. The data indicated that nearly 30% of HomeShop18?s sales were coming from the top 20 cities. ?This indicated that shoppers in the metros were perhaps mall-weary or recession-hit and were now looking for an alternative shopping mode that would fetch them more value for their money,? he adds. Armed with this in-sight and fresh funds from the investor, HomeShop18 is ramping up fast in Bangalore, Delhi, Mumbai and Hyderabad.

That the home shopping business is unique cannot be denied. Even within the broadcasting space, HomeShop18 is different from other news channels in the sense that it combines several business streams?a buying house that identifies products that can be sold on TV; a broadcasting arm that generates six hours of live programming; a fully-supported logistics division to ensure undisrupted, timely deliveries to 2,300-odd cities; an IT support system to create a seamless multimedia environment to club television, web (HomeShop18 has a vanilla shopping site that is primarily a catalogue service) and print (brochures and other marketing material); and last but not the least, a 24-hour customer contact centre that has to be manned not by usual teleservice agents but by trained salesmen with deep product knowledge, who can be spokespersons for the brands.

How essential is the back-office support for this kind of channel can be gauged from the fact that while headcount for HomeShop18?s rest of the divisions (marketing, sourcing, logistics, finance and creative) is 250, the employee strength at the call centre alone is 350.

The programming content, like that for news channels is based on share of viewership and time of the day, but is more research-driven. Brands love the opportunity to organise clearance sales for end-of-life products, while for some the channel also provides a platform for test launching new products?Inalsa home appliances and Bleu mobile phones did it recently on HomeShop18. The channel allows a maximum 30 minutes to showcase a new product or demonstrate its utility.

There are various category of shows?kid-specific, beauty-specific, cookery shows (for example, Sanjeev Kapoor?s Chef Ka Tadka), shows on gadgets (Mobile Shop), home d?cor (Feng Shui), home appliances (Home Maker and 500 Ka Dum where all products are priced under Rs 500) and Jewellery Show. The human face of the channel are the anchors, who are product experts as well as shopping companions to the viewers?unlike the hosts of a usual soap or reality show.

As of now, there is still some amount of skepticism. This is evident in the customer?s choice of the payment mode. Although HomeShop18 TV offers all payment options, nearly 90% chose cash on delivery. The repeat customers are less (20%) although this may increase with more reach and popularity of the one-year-old medium.

The way to go is to be available on DTH space, launch new brands and also sell insurance and holiday products that are doing so well on the internet. Replacing studio with real time street shots could also add more oomph to the channel. The only issue then would be how to get couch potatoes off the couch?