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December 13, 2009

HomeShop18's deal with Korean firm

TV18 Group's television and online retailing venture HomeShop18 recently sold a 15% stake to GS Home Shopping, a Korean retailer. In this context, Businessworld has an interview with Tae Soo Huh, president, GS Home Shopping (earlier called LG home shopping), Raghav Bahl, founding-promoter and MD of Network18 and Sundeep Malhotra, CEO of HomeShop18.
You launched in April 2008 with a bang, but the business does not seem to have gained much traction...
Sundeep Malhotra: We started when there was a lot of scepticism because of the poor response to teleshopping. But HomeShop18 is not teleshopping. Initially, we had little domain knowledge about the market, and we did not know whether to focus on the metros, or the tier-II and III cities. Today, we are doing a sale every eight seconds with sales of Rs 1 crore a day. We are serving 2,750 towns and cities with 20,000 products and 600 employees.

Raghav Bahl: In the first year, with a commission-on-sales of 23.5 per cent, we made a net income of Rs 50 crore on sales of Rs 250 crore. We would have been happy with even half that figure...Home shopping did not click initially because the environment was not there. Average annual income has only recently crossed the $2,000-mark and it is now discretionary spending — which is what home shopping is all about — has taken off. The opportunities will be huge as India moves to become a $4-5 trillion economy.

Do people in Korea shop more on television or online?
Tae Soo Huh: Initially, 24 hour-television was the main platform, and then came e-commerce. The current sales mix is: television, 50 per cent; on-line, 35 per cent; catalogue buying, 15 per cent. But the products we sell online are typically different from those on television because the consumer is different. The high sales on internet show Korean society is highly wired-up. In India, too, we hope to ramp up e-commerce, and we will expand the product categories to focus on cosmetics, kitchen appliances, services and health and beauty that are currently missing. We will aim for the high-income households that will yield higher margins.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in