Television home shopping is witnessing a resurgence with new channels coming in. Even e-tailers have jumped into the fray while established channels experiment with online versions
THE convenience of modern day living is such that one can twirl on a comfy chair, drink hot chocolate, and yet order those flashy headphones or that signature celebrity sari that one longs for. And if the product is endorsed by your favourite actress Sonakshi Sinha or television soap diva Ekta Kapoor, the urge to give in to impulse buying is that much more. Indian consumers are increasingly getting used to the idea of shopping from home and the comfort attached with it – a revelation that has come from the great e-commerce explosion in India.
But even as e-commerce hogs the headlines, the television home shopping industry is witnessing a phase of resurgence. Having made its debut in India almost a decade earlier, the segment is effectively leveraging cable and satellite penetration in India. According to consulting firm Media Partners Asia (MPA), the cable and satellite market consists of 140 million households or 650 million people as of December, 2014. In comparison, the number of internet users is estimated at 302 million.
The latest entrant in television commerce is Best Deal TV, a home shopping network started by entrepreneur Raj Kundra and actor Akshay Kumar which aims to leverage celebrities and get them to endorse products. Living Media India Ltd (India Today Group) has recently launched Bag It Today. Naaptol, which started as an e-commerce platform, has recently launched Blue, a 24- hour dedicated TV channel. In addition, the company has partnered with leading multi system operator (MSO) Hathway to launch Hathway Shopee, which is exclusively available on the MSO’s digital platform. Similarly cable distribution platform Den Networks has entered into a 50:50 joint venture with Snapdeal to launch Den-Snapdeal TV Shop, a television channel. Other key players include Planet M Shopping, HBN Telebrands and TVC Retail.
Arvind Singhal, chairman and managing director of retail consultancy Technopak says that he is surprised by the sheer number of new entrants in the television home shopping space. “With increasing infrastructure, technology and broadband speeds, e-commerce will pretty much eclipse out everything else in the retail business in the next few years. Which is why, I cannot fathom just why so many companies have chosen to venture into television commerce.”
But the newbies are gung-ho. Raj Kundra, chief executive of Best Deal TV says, “We aim to be the market leader in the next two years. The shareholders are Shilpa Shetty Kundra, Akshay Kumar and smaller investors. The cost of running our channel is R100 crore per annum that the promoters are covering. We expect to see a first year revenue of close to R500 crore and commission revenue of R100 crore.”
Kundra has reportedly raised R32 crore for the home shopping channel by selling 15% in the company to a private equity firm. The transaction reportedly valued Best Deal TV at R260 crore. The channel, India’s first celebrity-based channel, will be free to air and available on major cable and direct-to-home platforms and online. The celebrities on the channel are coming in on a profit sharing basis. Ekta Kapoor’s new line of ethnic wear and jewellery under the brand name of ‘Ek’ will be available exclusively on the channel. Ekta Kapoor in a statement said that television and style are both consumed by viewers in different forms on a daily basis.
“We are looking to make a mark by making the brand accessible through online and shopping networks,” she said. The channel debuted with Shilpa Shetty Kundra’s line of ‘Slim Shape Jeans’ and Akshay Kumar’s Twist headphones and hybrid speakers.
The Den Snapdeal TV Shop is a 50:50 partnership between Den Networks and Jasper Technology and will soon be extended to other cable networks and direct to home platforms in the coming months. Manish Goel, business head at Den Snapdeal TV Shop said that their aim is to create “life changing” experiences for buyers and sellers. “Through our marketplace platform, we are able to cater to the internet audience in the country which stands at approximately 200 million. There are over 150 million households in the country that consume content through television but may not have access to the internet. Realising that this is a tremendous opportunity, we launched this venture.”
A media buyer who did not want to be named says that at least two regional broadcast groups are gearing up for home shopping channels.
“As people get accustomed to shopping from home and lives get busier, there will be more of such channels. We have been approached by at least 3-4 companies who intend to spin home shopping channels and want to know about the distribution of such channels. In future, there could be more of such launches.” says Salil Kapoor, chief operating officer, Dish TV. The DTH operator already has Star CJ, HomeShop18 and Naaptol on its platform and will soon have Best Deal TV too.
The new kids on the block have big plans. Den Snapdeal TV Shop aims to reach 100 million households within the end of this year, and a gross merchandise value (GMV) of R500 crore in the next one year. Goel says that the biggest benefit will be for customers in tier two and three cities who have limited access to internet services. “In Den networks, we found a like-minded brand that reaches about 13 million households in over 200 cities across 13 states in the country. Through this venture, Snapdeal is leveraging its distribution network and Den’s reach to provide customers easy access to a wide assortment of products across home, lifestyle and electronics categories with great value deals.”
Best Deal TV has tied up with some logistics companies which will allow them to reach out to 10,000 zip codes in the country. It will deliver pan-India in three days. “In the next six months, we will be launching into a path breaking move, where we actually deliver pan-India within five hours,” Kundra says.
As per media buyers, the channel wants to break into regional markets as well and is expected to sign up celebrities from Tamil Nadu and Andhra Pradesh. Kundra’s venture is expected to start off with nearly 30 products in the lifestyle, home, health, fashion and beauty segments.
If Snapdeal has entered television commerce with its tie-up with Den, HomeShop18, one of the country’s oldest television shopping companies, has recently expanded into the digital space with HomeShop18.com. While home shopping will continue to play the role of mass reach and high volume sales, the web business will attract the more discerning digital customer, says Sundeep Malhotra, founder and chief executive of HomeShop18. While television is more profitable because of the high margin business model, internet is low margin and a long tail business, he says. “We will keep strengthening our television business making it a high growth, high profitable business. Mobile and web will support television, recruit new customers and will act as catalogue for products on television,” he says.
Star CJ Network, owned by Korean company CJO Shopping and Providence Equity Partners, had itself announced earlier its plans to launch a second home shopping channel called Star CJ2 Live, positioned as a lifestyle channel primarily targeting women. In addition, it has been exploring the regional space for starting television commerce channels. “We attract a daily viewership of more than 65 million, which is growing rapidly with the television shopping market or T-commerce, as it is termed, maturing in India,” says Kenny Shin, chief executive of Star CJ. “Currently we have a mobile enabled website and soon we will be launching our mobile app.” Star CJ says it is not worried about the competition since they are “educating” consumers and expanding the market. “This particular vertical of retail is yet to be explored and optimized to its full potential in India. Considering the rate of acceptance for this retail window, India seems to be an extremely promising,” says Shin. The channel is open to any strategic alliances with e-commerce operators as long as they are able to keep up the differentiation.
Mihir Shah, vice president at MPA says that credibility has greatly increased for the Indian television home shopping business. Brands such as Samsung and Videocon have started to utilize the services of television shopping players. In addition, leading service brands such as Bajaj Allianz and ICICI Lombard have also experimented with the platform. Growing at 40-50% year on year, the television home shopping industry generated GMV sales of R3200 crore in FY 2014, says MPA. GMV refers to the total value of merchandise sold on the shopping platform. MPA analysis indicates that the television home shopping market could generate R4500-5000 crore in the financial year ended March 2015. The two market leaders are HomeShop18 and Star CJ with market shares of 48% and 20%, respectively.
Star CJ’s Shin says that television home shopping is still at the infancy stage in India. “Over the last two years, Star CJ’s annual growth rate was about 40% in India. In developed markets such as USA, UK, South Korea and Japan, the annual growth rate for television home shopping is less than 8-9%. We can assume that the home shopping market annual growth rate in the next 3-5years will be 35-40% in India. We estimate the home shopping industry to reach $5 billion in the next five years, with more players expected to enter the market,” he says.
But Singhal of Technopak is not convinced. “The growth for existing television home shopping companies such as HomeShop18 and Star CJ has been fairly good, if not phenomenal, because of the widespread nature of television and the limited penetration of the internet. But to my mind, this is all temporary.”
Agrees Naaptol founder and chief executive Manu Agarwal who says that home-shopping as a business is seeing the influx of new companies, but few will manage to survive the race. “If you have ten home shopping companies today, in the coming years, there will be twenty. But eventually, the market will even itself out and there will be very few who manage to survive. Television home-shopping as a business is far more difficult to operate than e-commerce. There’s a lot that goes into the bringing in of quality products and supply chain management. Some of the older companies such as Homeshop18 and Star CJ still continue to lose money.”
Home shopping in India has traditionally borne the cross of counterfeit products. Star CJ’s play into the mass market has been slow and gradual. It entered with premium brands such as Samsung, Dell, Blackberry, Tanishq, Satya Paul, etc., and then moved into categories such as small appliances, kitchen and household items, interiors and cosmetics. “About 30% of products offered on Star CJ platforms are unique & ‘only one’ products,” says Shin.
HomeShop18 says that out of 50 million households, 28-30 million people watch the channel daily. “Today, 40% of our customer base belongs to tier two and three markets, with towns such as Guwahati, Jammu, Lucknow, Patna, Bhubaneswar, Surat, Nagpur driving consumption trends. Growth will come from emerging markets, tier three and four towns such as Darbanga, Agartala, Chandrapur,” says Malhotra. He says the channel will bring new products within each category and find a way to “manage the regional language requirements of the country”. “We intend to not just look at the Indian brands, but also global brands.”
The MPA report says that e-tailers are incurring significant losses, but are focused on driving valuations through exponential top-line growth. In contrast, television home shopping companies have delivered balanced growth with profitability. The more volatile and business seems to be that of e-commerce. On an annual basis, television home shopping players advertise 3,000-4,000 products with a high majority being private labels and small to mid-scale brands. In comparison, Flipkart and Snapdeal stock over 15 million and 5million respectively. This strategy enables TV companies to command commissions of 30-40% of the sale price, compared to 5-20% for e-tailers, say Shah.
Kundra from Best Deal TV says that it is completely surprising the way e-commerce companies are burning up money by discounting below cost price and calling it customer acquisition cost. “This is not real business and won’t last forever. You will see many consolidations happening in this space when funds dry up. I still believe in making money and passing on value to a customer in the old brick and mortar way. Home shopping does just that but with wider penetration and most probably cheaper overheads than large scale retail set ups.”
** We aim to be the market leader in the next two years. We expect to see a first year revenue of close to R500 crore and commission revenue of R100 crore.” Raj Kundra, Chief executive officer, Best Deal TV
** This particular vertical of retail is yet to be explored to its full potential in India. Considering the rate of acceptance for this retail window, India seems to be extremely promising.” Kenny Shin, Chief executive officer, Star CJ
** We will keep strengthening our tV business making it a high growth, high profitable business. Mobile and web will support television, recruit new customers and act as catalogueS for products on tV.” Sundeep Malhotra, Founder & CEO, HomeShop18