It is not just about tummy trimmers and dodgy gemstones.
Home Shopping, it seems, is serious business — not just on TV but across media. That is what Sundeep Malhotra, CEO, TV 18 Home Shopping Network would have us believe. The Rs 1,000 crore Network18-Saif Partners joint venture began operations in April 2008. It offers about 20,000-odd products across 2,000 Indian cities. These are sold through television, print, the internet and a catalogue service.
According to Malhotra, Home Shop 18 has sold goods worth Rs 300 crore since April this year. That is about one-fourth of what Shopper’s Stop sold in 2007-08. (Remember Rs 300 crore is turnover, it would mean revenues of roughly Rs 30 crore). More than 70 per cent of Home Shop 18’ sales came through the shows on its eponymous TV channel, the rest come from other media.
There are no estimates on the potential for home shopping in India. However if online shopping, which is traditionally calculated as a part of home shopping, is any indicator then things look good. Indians spent about Rs 9,000 crore on buying goods and services using the net in 2007-2008, according to the Internet and Mobile Association of India.
In a sense the Indian market is going the other way. Globally, catalogues and then TV, is what kicked off this market. In the UK for instance, in 2007 consumers spent £58.34 billion (Rs 408,400 crore) buying things sitting at home — through catalogues, the Internet, TV or other media. About one-fifth of this was spent buying stuff off the net, which happens to be the fastest growing part. In India catalogues never took off, nor did ordering based on newspapers. While TV shopping does, it is not quite the same. Almost all news, and several general entertainment channels carry home shopping slots at unearthly hours. Most usually have faded TV stars selling what look like dodgy products — a gadget that sucks oils out of cooked food to make it low fat, beads to restore your good luck and so on.
In fact, in 2006, when Network18 founder Raghav Bahl and CEO Haresh Chawla approached Malhotra to set up the home shopping business, he was sceptical. A hardcore FMCG man whose last stint was with Pepsi, home shopping and media were alien to him. “There was this huge credibility issue. There were these images of foreign- looking people selling magic potions and overpromising on television,” remembers he.
Now, in December 2008, it seems to be an idea whose time has come. Not just Network18, several other media companies are now focussing on it. For instance the Rs 1,600 crore Star India, a part of the $32 billion (Rs 128,000 crore) News Corporation has put a senior manager in charge of the business. There is talk of a tie-up with an Asian company in the space. “Television has done a wonderful job of encouraging consumption and creating desire, but where it lacks is in fulfilling that desire. Home shopping helps close that gap between desire and action,” says one industry expert.
To fulfil that gap however takes more than just owning a TV channel. Going by the Home Shop 18 experience this business is not just about media — it is a blend of media, retail and surprisingly, the business process outsourcing or BPO. Malhotra outlines the three steps that worked for Home Shop 18.
The first, it took a conscious decision to sell only branded products that come with a guarantee. Its 20,000 products range from consumer electronics to home appliances, mobile phones and so on. “Earlier most brands refused to associate with a home shopping network because they thought it would lower the image of their brand. Others said you are creating a new sales and distribution platform, why would we want a new one,” says Malhotra. Its ability to demonstrate the product on TV and the fact that it charges lower margins (and passes them on to consumers) worked in Home Shop 18’s favour.
The second, was having a distribution set up for small-town India. It tied up with various courier companies and also created a system which allows consumers to pay cash-on-delivery, usually to the courier who delivers the product. This meant creating a reverse path for both cash and faulty products.
The third most important factor to Malhotra’s mind was a call-centre manned by 500 sales-people (a bulk of the company’s 700-strong staff). Each of them is trained on 50 products a day and can sell any of the products the company advertises. An earlier experiment with outsourcing the call-centre bit had proved disappointing since most of the BPO employees were just not geared to making a sale, a crucial part of the fulfilment process. “Total control over all the operations was the only way to establish credibility,” says Malhotra.
The most painful part however was getting distribution. TAM measures TV ratings and broadcasters pay cable operators a premium to ensure that their channel is available in the markets that TAM monitors. However since Home Shop 18 is not a rating-oriented channel, getting operators to carry it was a tough thing. Currently the channel is available in 5 million cable households and reaches about 25 million Indians.
The snags in the home shopping haven? Considering that e-shopping has already taken off, would TV shopping have any potential. According to analysts the penetration of TV gives it an edge — at 115 million homes against 11 million net subscribers, the number of homes and people that TV reaches is simply 10 times as much. The other more serious argument against home shopping is that in a country where several million square feet of retail has come up and consumers are just discovering organised retail, why would home shopping take off. That is something only the success or failure of any of these new players will answer.
So far the shopping patterns on Home Shop 18 seem to bust many myths. A bulk of the buyers are from the metros, not small towns and many are men, not just housewives with nothing to do. And one-fourth of what is bought is jewellery. As an economist would put it, you can always rely on consumers to be irrational.
Vanita Kohli-Khandeka, is a media consultant and author of The Indian Media Business. She can be reached at firstname.lastname@example.org