STAR CJ Network India Ltd, a 50:50 joint venture of News Corp owned Star TV and South Korean firm CJ Shopping, launched its home shopping shows on the channel STAR Utsav last year, and is in the process of launching a full fledged channel, competing with Homeshop18, the home shopping business from the Network18 group that recently raised $23.5 million from another South Korean firm, GS Home Shopping. MediaNama recently spoke with Paritosh Joshi, CEO of STAR CJ Network, on how the company intends to approach the home shopping business, whether they can achieve scale with relatively premium products, distribution plans, mobile and Internet plans, pan-India distribution and much more. Part 1 of the interview:
How has been the initial response been, since the launch of the Star CJ Shows?
The immediate way of response recording that we have is to monitor the number of phone calls, because our is a direct response kind of a device and the very first day we launched 22nd September we were overwhelmed by the response, we thought we would get about 100 calls in those 6 hours we were telecasting that day, in reality the very first day something like 24000 calls landed up on the PBX. All did not get through because we did not have the human capacity to actually handle all the calls but that was then. What is happened is that ever since then of course the initial madness of generally picking up the phone and dialing a toll free number has perhaps abated, and the other we have done is that we have ourselves blocked access to phone numbers that lie outside our service area. Our service area is primarily Bombay, Pune and Nasik in Maharashtra, and the NCR.
We have put a block on calls that originate outside out service area so that cuts off a lot of calls but even then we get something a few thousands calls, between 2000 and 4000. Out of those, half are blank or pointless calls, because it is one of those pains of call centers in this country that people will randomly pick up the phone and randomly want to talk to somebody. But that still leaves you with a good 1000-2000 calls a day where there is a level of seriousness of the call and they are actually trying to figure out what our services are, what kind of products we have. This without any marketing, and with minimal promotion on the STAR Network.
But the real barometer of success would be the orders that have been placed. So what about those?
I am not going to give you the exact number, but we started out really small, like we would get an order here and order there but on a steady regular basis that number has grown very sizably and we are processing in the course of a month a few thousand orders. This is still tiny; even in the context of our market area, it is small, but it’s a start with zero marketing muscle behind it.
You’re not going after the sauna belt market, so would you also be looking at affordable products? Without affordable products, can you achieve volumes?
If you look at classic home shopping model, like our own Korean partners in China and Korea, their products range actually extend from seriously high-end designer wear to groceries. They stock fresh fruit and vegetables, cheese, meat and they actually sell these things through the home shopping network. So conceptually you can span a wide range through these homeshoppping malls. It’s only this that we have a very specific communication challenge on hand. That challenge is that the consumers notion about this service category that it has shady products made by dodgy manufacturers with basically none of the consumer rights being protected. I think of this as predatory marketing, and the consumer is therefore perceived as prey for these predatory marketers. So we need to reassure the consumer of the product quality, and all the rights the consumer should have in a normal shopping transaction are fully protected and we are conscious of them.
So we need to actually work towards a huge attitude shift, and to achieve that attitude shift, we want to take out a product range and entire proposition as far away from what she is normally accustomed to on TV as it is possible to do. Our entire focus is on really focusing on high quality brand, great products with all the reliability issues taken into account, so eventually we will come back and have a wide product range and there will be all kinds of price points. But right now, it is very important to establish that we are not those sleazy fly-by-night kind of people, we are a genuine, authentic high quality shopping experience and that’s what we are endeavoring to do.
So how do you intend to push that message across, build that confidence?
It is being done in two ways: One is our choice of brand and the pitch that our communication. Until now the content style of the typical guys in the teleshopping racket is basically to harass you with what really constitutes predatory behavior, either it is for example aapkey bal jhar jayengay, or uskey bad aap ganjey ho jayengay or uske bad aapke dost aap key sath nahi rahengay aapka career khatham hojayega (translated: you will lose your hair, become bald, and your friends with leave you, your career will be finished). So it is completely predatory and the entire pitch is so shrill that is all about psychologically hammering into your head that without this you are toast. Whereas, I am obviously taking a different content style, which is that my content must be informative, entertaining, engaging and following all the parameters you would follow to make really great general entertainment content.
So my standards on the quality of content are going to be set by benchmarking myself by the work STAR does because we need to create a shopping experience but we need to do it in a manner which is enlightening, cheerful, enjoyable and so on. So we set ourselves a set of very different and much higher level of production quality, the knowledge of the product that our anchors have is personal and they are extremely well informed
So your costs will be higher as well, then?
A: Of course yes. I run a full fledged content production unit on site, we have our own studios, our own graphics facilities, our own edit suites, sound recording arrangement the entire thing, and we are a full fledged content production house.
Then do the margins on the product justify the cost that you are taking at this point of time?
At this point of time obviously not, if you ask me that my business model is paying for itself, it’s not. At this point we connect with a small number of consumers. That will grow, not to mention the fact that the basic understanding of the our service and the products the consumers can shop from there, that has been an exponential growth pattern. It does not grow in a linear way; there is a sort of a cumulative exponential effect that begins to happen because more and more consumers understand the service, and then they talk about it. The experience internationally suggest that the most powerful driver of adoption and regular usage in home shopping, is personal experience of the consumer and the word of mouth: they like to talk about a good shopping destination, eating destination, holiday destination.
In terms of distribution how do you plan to go about expanding your presence because one of the great opportunities must to make plans which are not available in particular towns and cities, to them? And you said that right now you are restricted to NCR, Nasik, Pune and Mumbai…You’re losing out on customers at this point in time.
Correct, but the real challenge in our business is unlike conventional broadcast model where basically your work ends the moment you uplink the feed, after that you really don’t have any control over it. In our business our work actually begins after we uplink, because when the signal comes down and when you see it in the TV and you pick up your phone because you like the product, then you call up the call center and place your order, then the fulfillment piece begins because you are going to expect the delivery of the product that you have ordered within a finite period of time and you are not going to wait forever and ever for the product to be delivered, now that is where the biggest piece lies, the fulfillment piece.
It is a really challenging, because there are so many complications to getting transactions done in our country. Even if you take the NCR itself you have three completely different tariff environments even within the NCR itself, the Union Territory, Uttar Pradesh and Haryana, and they have completely unique and distinct kind of local taxes, permit requirement. So a huge issue is even managing to do everything in a compliant way. Even within the state, take Maharashtra and Mumbai for example, Mumbai has Octroi and rest doesn’t. So there can be such an incredibly complex local taxation system, indirect tax system, that indirect tax compliance actually becomes a real serious challenge for fulfillment business like this.
So are you looking forward for the Goods and Services Tax?
(laughs) Who is not looking forward to the GST?