Bringing home the store

The biggest challenge for this alternative mode of shopping is to build trust in the model, says Sundeep Malhotra, CEO, HomeShop 18..

In less than two years since launch, HomeShop 18, an online and on-air retail marketing and distribution venture of the Network 18 group, has deve loped a large customer base, many of whom are repeat customers. The channel forms one of the largest alternative distribution mediums for over 450 brands. Sundeep Malhotra, Chief Executive Officer, HomeShop 18, talks to BrandLine about the challenges the channel has faced and how it has overcome them to make home shopping a credible medium.

What is the difference between teleshopping and HomeShop 18?

Teleshopping is about a single product. It’s not about a virtual mall which we are. Teleshopping is more about a trader buying a product based on an infomercial which is dubbed in regional languages and telecast during graveyard shifts on TV channels. The execution is tacky and it is not a brand or a product with a guarantee. We are doing home shopping. Home shopping is about selling credible products and brands. Second, it cuts across every conceivable product category. Right now we are selling products, we might move to services. We might also sell travel packages. Most travel packages have static ads, but we can take you through the sites, giving you the whole experience of a travel package. To ensure that the product is good, you also have to make sure that the execution is good. Most television channels work on an advertising revenue model. For us, it is purely transaction. We haven’t built our channel on TRPs. For us, it is more about reach, like any other distribution channel. We have a dedicated team of salesmen on the phone. We have our own team because we wanted a very different profile of salesperson, who was trained in a very different manner. Finally, the logistics footprint is also very important to ensure people get the products. We go to about 3,000 cities in the country and go right up to our customers’ doorsteps. We have developed cash-on-delivery as our payment mechanism.

What is the mechanism to deal with order cancellations, especially as cash-on-delivery is the payment mode?

We also have a reverse logistics footprint. What happens if the customer changes his mind about a product? We had to build infrastructure to deal with the product being sent back. An IT footprint that could track and monitor every transaction was needed. We receive about 25,000 calls on a daily basis. We have more than 400-450 brands and seven-eight logistics players with us. Each of these transactions has to be reconciled to track the transactions. All of these come together to bring you home shopping.

I think one of the things where we need help from all quarters is to educate the customer about the difference between teleshopping and home shopping. That is also why we have opened the doors of the facility so that people can have a first-hand view of what goes into the delivery of a product.

Most people in the country are acquainted with teleshopping and the infomercial route of shopping. The biggest hurdle that we have to overcome is the legacy. The legacy of buying with touch and feel. Our job today is to build credibility and trust in home shopping.

Infrastructure is another important hurdle. We have 5,000 cities in the country, but only 2,000 of them have motorable roads. Multiple taxation systems are another major problem. To move a product from one State to the other poses a lot of problems, simply because of the tax structure. The common goods and services tax, when it comes in, should hopefully take care of this aspect. Domain knowledge is another hurdle we have to overcome. None of us have had experience in this domain ever before. We learn as we grow.

There is also the problem that not too many products trust the home shopping domain. But anyone who has trusted us has had a great experience. Today, we are the largest retail point for Reebok despite the scepticism. But we are slowly emerging as the largest retail point for various brands. People are beginning to see the benefits of an alternative distribution platform such as Home Shop 18.

Where does the bulk of the business come from?

When we started, people said big cities would be hard to penetrate as there is a lot on offer in the city itself. During the initial phase, we distributed in the small cities, where there is no carriage fees. But today 30 per cent of our business comes from the top five-six cities. Delhi is our biggest market. I think everybody shops, though the reasons may be different.

How difficult is it to ensure that the cash-on-delivery mechanism works?

We knew from early on that we had to build credibility. The history of people selling on television hasn’t been good. We felt cash-on-delivery would be a critical component in attracting customers. We had to build the infrastructure for cash-on-delivery.

The courier boys get about Rs 2,000-2,500. How does the courier company ensure the money is brought back safely? Second, cash-on-delivery also gives up the customer commitment to a transaction. People can change their mind. Cash-on-delivery is a tricky business but a large proportion of our customers begin with cash-on-delivery and then move on to cheques and credit cards.

What is the current customer base of HomeShop 18? What does the future have in store for it?

We are nearing two million customers in 22 months and 18 per cent of our customers have already moved to repeat purchases. A few customers have shopped with us more than 90 times in 20 months. Repeat customers see the benefits of home shopping. After all, it provides unmatched convenience. But these two million customers have been the early adopters. The masses are yet to be reached.

Being a distribution platform and an interactive medium, we felt we should go beyond products.

There is no reason why services won’t get sold. Items such as insurance don’t get bought, they have to be sold. Insurance has been very successful in various countries. Sector-wise, we are going to add some new categories such as insurance, real estate and travel and will increase the depth in the existing categories. Each existing category will be broad-based and widened this year.