No longer is TV a source of mere audio-visual entertainment; it has become a virtual marketplace where people can buy almost anything under the sun simply by pushing buttons on the remote control and dialing the phone numbers displayed on the screen.
Created stateside in the late 1980s, TV home shopping has swept Taiwan to become a powerful new retailing channel, constituting an important part of the "third-wave revolution" in retailing. The emergence of department stores and appearance of supermarket chains are regarded by market analysts as the first and second waves, respectively.
Radically different in concept from brick-and-mortar retailers, virtual stores have indeed altered consumer behavior, with TV and the Internet becoming increasingly popular interactive mediums for retail therapy. In Taiwan, the growth in TV home shopping has been striking. Commodities, such as diamonds and sport utility vehicles are now sold via the nation's home shopping channels.
It is predicted that within the near future, TV home shopping operations will generate revenues of approximately US$3 billion nationwide, with analysts estimating a potential market of twice that size.
The very first TV shopping operation--the Home Shopping Network--was born in Florida in 1982. Spurred by its skyrocketing sales, numerous copycat operations mushroomed. At present, QVC Inc., founded in 1986, runs the largest TV home shopping business in the United States. With over US$7 billion in sales last year, it reaches more than 166 million cable- and satellite-connected homes worldwide.
The home shopping trend began to take root in Asia in the early 1990s. In South Korea, LG Home Shopping enjoyed a 50-percent growth in sales per year between 1994 and 1998. Following its success, CJ Home Shopping and Hyundai Home Shopping joined the fray. Besides commanding South Korea's domestic market, these companies have also exported their shopping-related software technologies.
The development of Taiwan's TV shopping business is closely connected to that of cable TV, which was launched in 1992. Suddenly a profusion of cable channels were available in addition to the original three terrestrial stations--Taiwan Television Enterprise, China Television Co. and Chinese Television System Inc.
The opening of so many new channels signaled the beginning of home shopping islandwide. Initially, small TV retailing operations paid between US$3,000 and US$6,000 per month to rent a channel from cable operators, on which they transmitted recorded programs to market their products. This new business model earned handsome profits for both retailers and cable operators, attracting even more competitors into the market. As of 1994, there were around 300 small-scale TV shopping companies broadcasting locally and nationally, generating about US$120 million in sales.
The early years of Taiwan's home shopping market was not all smooth sailing, however. On the one hand, retailers were faced with vicious competition. On the other, cable operators raised the programming rates in response to booming demand. Together, these two factors caused profit margins to shrink greatly.
Moreover, the virtual stores offered too many similar products of dubious quality. At first, the legion of small TV retailing entrepreneurs focused on beauty treatments and cosmetics, breast enhancement, height increase devices and health-related products. Many such offerings were questionable in their claimed efficacy, prompting numerous complaints from consumers who felt cheated by exaggerated advertisements.
These problems slowed TV home shopping market's growth in the late 1990s, with revenues ranging between US$160 million and US$300 million per year.
This state of affairs changed dramatically in 1999. Eastern Multimedia Group--the nation's largest and Asia's third-largest cable operator--made inroads into the island's television home shopping business with its enormous advantage in cable resources and experience in program production. That year, with capital of US$16 million, EMG established a subsidiary, Eastern Home Shopping Network, which revolutionized the industry.
Following the example of U.S. operators, Eastern emphasized live broadcasting with attractive program hosts demonstrating products with entertaining pizzazz.
As the first Taiwan-based station to employ a television commerce model, Eastern offered 18 hours of live home shopping programs per day. Its sales grew so explosively that it decided to establish another four TV channels solely dedicated to retailing. Together, the five channels eventually commanded a market share of over 80 percent.
To strengthen consumer confidence in purchasing via its virtual retailing operations, Eastern offered unprecedented services and guarantees. These included interest-free installment payments, return or exchange of merchandise without charge or hassle, 24/7 service and multi-year warranties.
Eastern's President Jennifer Sung explained that people did not at first have good impressions of TV shopping due to boring programming and spotty quality. In order to alter this perception, she emphasized, Eastern presents itself as a "TV department store," which serves customers with comprehensive product information, a wide variety of carefully selected and useful goods and--most importantly--bargain prices.
In addition to providing integrated services that ensure a high degree of customer satisfaction, the company launched its own branded products, such as De Mon and Butylab cosmetics, thereby enabling it to further lower prices while making it easier to guarantee quality. Later, Eastern expanded its business from TV to the Internet and launched a mail-order shopping business as well.
Each of these retail business models has its unique features and advantages. TV retailing accentuates visual appreciation but allows only one product to be shown at one time. Mail-order catalogues offer thousands of products in a compact format. The Internet is superior for speed of transactions in addition to responding most quickly to changing fashions. Last year, the company generated sales of around US$840 million, a huge jump from the first year's US$16 million.
Because of Eastern's success, other business conglomerates have attempted to cash in on the virtual shopping craze.
Fubon Multimedia Technology Co. Ltd., the network's first such competitor, was founded in 2004 as a joint venture between Fubon Financial Holding Co. and Woori, a leading Korean TV home shopping operator.
FMT launched its Momo cable TV channel home shopping market, broadcasting live programs 24 hours a day and eventually reaching some 5 million local households.
Founded in 2001, Woori transferred its technologies and experience to the joint venture. FMT also benefited considerably from the marketing expertise of Fubon Financial Holding, which sells financial products such as mutual funds and insurance.
Encouraged by Momo's meteoric growth in sales, FMT this year filed applications for two additional shopping channels with the National Communications Commission, the governmental body that regulates the nation's telecommunications, Internet and broadcasting businesses. According to FMT, one of the new channels will specialize in marketing financial, insurance and sports products, while the other will focus on high-quality imports and computer and communications items.
In addition to its virtual retail operations, FMT established a chain of real-world cosmetics shops in Taipei Mass Rapid Transit System stations and in densely populated urban districts. Last year, FMT generated US$230 million in revenues, and is expected to earn US$ 330 million this year.
Eyeing the successes of Eastern and FMT, Chinatrust Venture Capital Corp., a subsidiary of Chinatrust Financial Holding Co., has moved to stake out its share of the lucrative TV shopping pie by launching the ViVa TV cable channel in 2005. The new shopping channel focused on offering customers food products and daily amenities, providing fast delivery to guarantee freshness. At present, ViVa has an estimated regular client base of 1.3 million and is expected to generate sales of US$160 million this year, up from last year's US$116 million.
As more big players enter the TV shopping arena and expand their scale, their prospective customers benefit from sharper competition to assuage their concerns about product quality, obtaining refunds, after-sales service and leaking of personal information. Given that the estimated potential market for TV retailing has been only half-realized, as long as home shopping operators find ways to satisfy shoppers and differentiate themselves, the virtual department store business can look forward to a bright future for some time to come.
Copyright 2008 by Allen Hsu
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