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Media biggies plan 24-hour shopping channels

February 05, 2008 09:05 IST
After establishing entertainment networks, media conglomerates are gearing up to launch 24-hour shopping channels in the country.

The STAR India-Bennet, Coleman & Company (BCCL) combine, Subhash Chandra's Essel Group and TV 18's HomeShopping 18 are among those who will air home shopping channels in the next couple of months.

Foreign partners

All of the companies have roped in foreign partners for their respective home shopping networks.

TV18 group has got initial funding from SAIF Partners, a private equity fund, which has a similar shopping network in China.

The STAR-BCCL combine has tied-up with a Korean company, while the Essel Group has got an NRI investor for its Asian Sky Shop property and plans to launch a home shopping channel soon.

Big opportunity

These ventures are driven by a desire to reap the first mover advantage in the Rs 300-crore home shopping channel space, which has a significant component of young shoppers with high incomes (nearly 55 per cent of the Indian population is below 25 years of age).

The youth and housewives, who are taking to convenience shopping, are a large and fast growing section.

Overall, Ernst & Young consultancy estimates the home shopping industry in India, which includes e-commerce, catalogue shopping and teleshopping, at nearly $2.5 billion. Growing 35 per cent annually, it is expected to become a $10 billion industry in the next four years.

Rising clientele

The customer base is expected to increase from 280 million in 2002 to 686 million by 2010.

"It is part of a broader trend with retail formats of the US are likely to be followed in India. Indian companies with media networks want to have the first mover advantage before the trend picks up," said Pinakiranjan Mishra, partner at Ernst & Young.

The US has seen many success stories with shopping channels such as HSN, QVC, ShopNBC over the past couple of decades.

The new players are also betting on the rapid increase in the number of homes with televisions, which was not the case in the early 1990s. The total number of TV homes has gone up from 108 million in 2005 to 125 million in 2007.

Said Sundeep Malhotra, CEO, HomeShop18: "We are primarily looking at the TV viewing audience with disposable incomes. They are not restricted to metros anymore and fast adopting online shopping, credit card usage and technology. We want to reach nearly 2,000 cities in a couple of years."

Dicey prospects

Interestingly, teleshopping, the predecessor of home shopping channels that begun in the 1990s, has not met with success due to factors ranging from low TV penetration, lack of awareness, odd timings and expensive TV slots.

Teleshopping companies buy time slots ranging from two minutes to an hour and air infomercials/product presentations, explaining the product's utility, price product code and call centre numbers.

UTV merged the teleshopping arm Tele Shopping Network (TSN) with itself in 1992 after initial losses. "We were ahead of time in the early 1990s when TV penetration was low and home shopping was very new. So we decided to move out," said a UTV spokesperson.

The Zee group, promoters of Asian Sky Shop, has roped in an NRI investor to revamp and establish its television home shopping business after Asian Sky was pushed aside by rising costs of TV airtime.

"Many of them advertise during odd-hours due to cheaper time slots on TV channels but nobody knows whether they are viewed by the target audience," Mishra said. "Besides, Indians believe in feeling the product before buying something. Teleshopping has been around in India for a long time, but is not doing well."

As home shopping channels prepare to beam into Indian homes soon, industry-watchers believe that acceptability and credibility of products, proper supplies, efficient payment mechanism and technology penetration could be the critical issues.

"When you are buying from an unknown person, there should be some credibility and assurance. Once the customer buys a product and comes back to you, you cannot redirect him/her to your vendor," says Purnendu Kumar of Technopak.

Building credibility

HomeShopping 18's CEO Malhotra says the company is not taking any chances with these issues.

"To create confidence among our customers, we will only go with credible brands. We will also launch the cash-on-delivery process and the cash-back facility if customers are not satisfied with our products."

The company has already built 19 product categories - from consumer electronics, sports and wellness, kitchen and so on.

"The whole idea is to take any product to any part of the country. We have set up a 300-seater national call centre to assist our customers," Malhotra said.

However, E&Y's Mishra is not so confident. "Though the Indian market is dynamic, I wonder whether two to three TV channels can make money with similar ventures."

Raghavendra Kamath in Mumbai