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Assignment Assessment Report

The Teleshopping Business in India

"The basic concept of telemarketing is that you should be offering what is not available in the retail marke

Why would anybody buy from us, if we were offering what is available in the traditional marketplace? Whave to keep coming out with exclusive products practically every second month or so." 

- Mahesh Panna, Country Manager, Telebrands, in September 2002.

Offering 'Miraculous' Products!

"Interested in reducing that 'extra flab' on your body in a matter of hours? Would you like to grow hair o

that balding pate of yours in just a few days? All you need to do is watch the television (TV) and order th'miraculous' products being advertised through the phone." Welcome to the world of teleshopping network

a phenomenon that had become a part of the lives of Indian TV viewers by early 2000. Day in and day ou

customers were swamped with images of models showing off their 'fabulous flat abdomens,' 'blemish-fr

skins,' selling disease-curing teas, wondrous kitchen and household equipment, on almost every TV chann

Though teleshopping networks became operational in the mid-1990s in the country, their presence w

never felt as strongly as it was during the early 21st century. A majority of these infomercials1 were dubb

versions of English (or other foreign languages).

Many consumers found it extremely amusing to see foreigners mouthing chaste Hindi (and other region

Indian languages) while advertising these products. However, it was the nature of the products being offer

 by these networks that attracted the maximum attention. Most of the infomercials featured products thclaimed to provide miraculous results. There were products, which could help one reduce weight and g

into shape without exercise or dieting.

There were other products that promised to make people give-up smoking and improve body posture. T

range of products included creams, potions, solutions, toys etc. Analysts questioned the reliability of su personal care products that claimed to beautify and tone up the body in a matter of days.

They considered these infomercials, which depicted common people using the product and explaining i

effectiveness, a farce. They argued that, these people were paid to speak well about products. Analys

criticized the teleshopping networks for trying to deceive the viewers into buying products with the belthat those people had actually used them. Despite these allegations, teleshopping as a concept was gainin

 popularity in India and more and more customers were showing readiness to try innovative products.

• Buying time slots on popular channels that had high penetration and enjoyed good viewership among thtarget customers. These time slots ranged from two minutes to 1 hour and comprised infomercials/produ

 presentations, explaining the product's utility.

• Providing a special product code for every product and displaying it along with its price.

• Setting up call centers in various cities, on the basis of the scale of operations and the extent of penetratio

expected.

• Providing viewers with telephone numbers of these call centers and asking them to call their nearest ca

centre for further enquiries or to order the product.

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How the Indian Teleshopping Market was won

During the late 1990s, the traditional Indian societal setup of joint families gave way to nuclear families.

the metros and even some smaller cities, the number of families where, both the husband and wife we pursuing careers had increased substantially and there was little time available for shopping outdoor

Teleshopping companies believed that this segment offered tremendous marketing potential and wou

easily take to convenient shopping from their homes.

In addition, the networks decided to target the premium-end TV viewers, with high purchasing power. Thgrowing sophistication among these customers enhanced their readiness to try new, innovative product

even at a premium. While deciding on the product-mix, teleshopping networks focused more on offerin

innovative and value for money products, which were not available in the market otherwise. These we primarily, impulse buying products, aimed at attracting viewers and inducing them to take an buyin

decision promptly. Thus, a select range of imported products were offered that mainly included electron

goods, fitness devices, home appliances and toys. The networks sourced their products with help of theagents (both in India and abroad) who identified and certified the quality of these products. In som

instances, the manufacturers of the products approached the networks directly for marketing and distributi

of their products.

The India-based networks such as ASK also offered products made in India apart from their imported rang

In early 2000, many local players also entered the teleshopping market and began offering products on loccable channels. However, the imported products were more successful as compared to the Indian produc

 being offered.

Analysts attribute this to the novelty of imported products and the inherent customer orientation towar

foreign goods in India. In the early 2000s, the networks began offering various customized products such  jewellery with birth-stone, which became very popular. New products were introduced constantly to attra

customer attention and ward off competition.

Most of these were developed in studios and featured well-known personalities such as former film and T

stars. However, dubbed versions of infomercials were used even in the early 2000s, as foreign products stformed a substantial part of product portfolio of all major teleshopping networks in India.

To ensure success, teleshopping networks paid special attention to their pricing strategies. In the init

years, most of the products offered by these networks were lifestyle products that came last in priority of

typical Indian household. Though the price of the products offered by various networks in the late 199was as low as Rs 5003, most of them were priced at a premium to target the upper classes. However, ov

the years, the number of utility products increased and the price of the products was also brought down

make them more affordable. In 2002, the price of the articles offered ranged between Rs 200 to Rs 12,00

with a majority of the products falling in the Rs 1,000-5,000 range.

The teleshopping networks competed with each other in terms of offering the same benefits at lower priceThis was particularly observed for various weight reduction products. All the networks marketed differe

gadgets that claimed to reduce weight derided the offerings of rival teleshopping networks claiming to cheaper and much more effective. Hectic activities took place on the promotional front as well, wi

networks offering 'early bird' prizes, price reductions, money return (if not satisfied with the product) offer

free accessories and double product packs at the same price. For effective distribution of their products, tnetworks focused on strengthening their franchisee base across the country. All the major networks in Ind

had their franchisers across major metros and semi-metros in the country.

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Towards the end of the year 2001, the franchisee network of Telebrands India extended to over 90 citi

across the country, while ASK's network spanned across 60 cities. The networks provided the telephon

numbers of all their distributors at the end of their infomercials, so that the customers could call their nearedistributor for further enquiries or to place an order.

On receiving a purchase order from a customer, the product was delivered to him/her through courie

Payment was generally made on delivery of the product. Unlike the late-1990s, when products were ondelivered against cash payment, in the early-2000s, the networks began accepting credit cards to encourag

customers to respond to their offers.

As a result of all the above initiatives, the awareness about the merits of teleshopping increased. Customer

who followed global trends in lifestyles and product usage, began to buy teleshopping products, and th

market picked up momentum. In 2001, the market registered an annual growth rate of over 20% anamounted to Rs 500 million. In 2002, Telebrands led the market with an estimated turnover of over 25

million, followed by ASK with a turnover of over 200 million.

Teleshopping Traumas

Though teleshopping market was showing positive growth trend, its growth rate was much below t

expectations of the players involved. According to a report,4 most of the teleshopping networks in t

country were not making any profits. In fact, TSN had closed its teleshopping activities in 2002 and w

concentrating only on online retailing (www.tsnshop.com).

According to market sources, Telebrands was the only network that was able to sustain itself and ma

 profits – though it was attributed by many to the strong support it received from its parent companTelebrands Inc. The reasons for the slow growth of the teleshopping market in India were many, the mo

important being the abundant supply of imitation product. Local entrepreneurs copied the produc

advertised on TV and very soon the markets were flooded with imitated versions of these products. The products were not only cheaper compared to organized sector products, but also offered consumers th

facility to personally touch and appraise them. Mahesh Panna of Telebrands said, "What happens is that w

come out with a product and it is promptly copied by a local player. He obviously sells it at a lesser price.

This way the whole market goes out of our hands." To address this problem, networks such as Telebran

and ASK opened special retail outlets in all major metros and semi-metros to enable customers to personalappraise the products offered, before making a purchase decision.

Apart from the new products, the companies also retailed those products, which had been taken off air (

make place for new products) but still had potential for sale.

However, the local retailers still enjoyed a substantial price advantage over the teleshopping networks due

local manufacturing, low transportation costs and elimination of distribution/delivery costs.

Though the teleshopping networks claimed that their pricing strategies were in tune with the targcustomer's profile, the reality was very different. The higher prices were proving to be a major hindrance f

the growth of teleshopping networks. Most of the products were priced between Rs 1,000-5,000. Custome

were found to be unwilling to pay this amount for lifestyle products that ranked rather low in thhousehold purchasing priority list.

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The differences in the culture and language also posed problems and hampered the prospects teleshopping market in India. As teleshopping networks needed to telecast their programs in differe

regions, they dubbed most of their infomercials into the regional languages.

However, they failed to have any impact in prospective customers as they did reflect the native culture the region. Another major problem for the teleshopping networks was the growing criticism for some of

 products. There were a host of products that claimed to do 'seemingly impossible' tasks for consumers.

For instance, products promising to reduce weight, remove unwanted hair, improve posture, impro

hearing and cure chronic diseases were eyed with suspicion by a majority of Indians. Also, the 'oveenthusiastic' and 'chirpy' foreign models that appeared in the dubbed infomercials were criticized on th

grounds of being rather awkward mouthing dialogs in Hindi and other regional languages.

Problems were further compounded due to limited reach of teleshopping products. The networks focuse

mainly on metros and B-class cities, neglecting towns and semi-rural areas which also had a growing ba

of educated and premium end customers who aspired for convenience and novelty produc

To address this problem, major teleshopping networks announced plans to expand their distributor base an

extend their reach to all corners of India.

Every distributor or franchisee was supplied with a minimum stock level, based on the expected market the product in that specific region.

Future Prospects

Despite all the above problems, the teleshopping market was believed to hold a lot of potential in India. Th

was primarily on account of the increasing base of convenience-seeking people and the middle-cla population. As the standard of living of these people improved, they became more receptive towards tryin

out innovative products and concepts.

Teleshopping networks, therefore, focused on integrating their operations and increasing their reach fthese customer segments. The decision to offer online-shopping services through special retail websites w

made with the same objective.

By mid-2002, most of the major networks such as Telebrands and ASK were deriving their revenues fro

three sources – websites (www.asianskyshop.com and www.telebrandsindia.com respectively), teleshoppi

and retail outlets, with a major part of the revenues coming from the teleshopping (franchise centers). Threvenues from websites were low due to the lack of online purchase awareness among the customers and t

low rate of credit card penetration in India.

Since global teleshopping networks proved to be a huge success, there seemed to be a strong possibility

their being successful in India, as well. But for that, teleshopping networks would need to play their card

right. It would not be too far-fetched to think of 24-hour dedicated Teleshopping channels in India in thfuture.

Questions:

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