The Zee group has set up Ez-Mall Online Limited as a wholly owned subsidiary of its media company Zee Media Corporation. Ez Mall Online Limited is expected to “engage in web-based e-commerce business” and will “complement TV-based e-commerce business currently housed under Company’s 49% Associate entities viz., Today Merchandise Pvt Ltd and Today Retail Network Pvt Ltd.”
Two things: Firstly, we thought Zee already had an ecommerce business. Secondly, this is Homeshop18 all over again.
Zee already has an ecommerce business
Remember that Zee had acquired the two “Today” companies from the India Today group last year, because they were preparing to launch a TV Shopping channel. Zee had put in Rs 39.78 crores for 49% stake, with plans to increase stake to 80% by putting in Rs 126 crores over 4 years. The pre-acquisition numbers for these businesses:
Today Merchandise Pvt Ltd
- FY15: turnover of Rs 3.84 crores
- FY14: turnover of Rs 5.25 crores
- FY13: turnover of Rs 5.11 crores
Today Retail Network Pvt Ltd
- FY15: turnover of 37.36 crores
- FY14: turnover of Rs 52.45 crores
- FY13: turnover of Rs 49.80 crores
Bagittoday seems to have shut down
Now a part of this portfolio was BagItToday.com, the ecommerce business that was being run by the India Today group. So why does Zee need to set up a separate entity for ecommerce when it already has BagItToday.com? That’s probably because it doesn’t: BagItToday seems to be offline now: the site doesn’t load, it’s not even showing up on Google Search, so it appears that it’s been offline for a while. Zee is probably looking to launch a new site (I’m guessing, called Ez Mall) to sell the same products online.
HomeShop18 was the TV Shopping and ecommerce business that almost listed: it was India’s first full-fledged home shopping channel, and then went down the ecommerce path to ride the ecommerce wave. It would have been the first true ecommerce business in India to list, and had filed for a listing, but fate intervened: Reliance Industries acquired Homeshop18’s parent company Network18, and the $75 million IPO was scrapped. The company eventually shut down its ecommerce division, and the ecommerce head moved to 99acres. Homeshop18 is still around, is still on TV, and its website focuses on products on TV instead of building a parallel catalogue to compete with majors like Amazon and Flipkart. Zee would do well to learn from Homeshop18’s experience with ecommerce, and avoid being the grass that gets trampled on as the elephants (Amazon and Flipkart) battle.
Data from Homeshop18’s IPO filing
Here are some data points from HomeShop18’s 2014 IPO filing. While this is not indicative of what the current market would be like, remember that ecommerce is still a loss making business proposition, because discounting to acquire and retain customers is the norm:
- Internet: $0.35M in FY11, $3.963M in FY12, $8.361M in FY13 and $4.08M for the 6 months ended September 30th 2013 (H1-Fy14).
- TV: $18.84M in FY11, $20.49M in FY12, $32.32M in FY13, and $21.524M for H1-FY14.
- Gross transaction value:
- Internet: $1.81M in FY11, $30.80M in FY12, $55.55M in FY13, $23.16M in H1-FY14.
- TV: $60.75M in FY11, $77.74M in FY12, $110.90M in FY13, $71.43 in H1-FY14.
- Average gross commission:
- Internet: 19.4% in FY11, 12.8% in FY12, 15.0% in FY13, 17.2% in H1-FY14.
- TV: 30.8% in FY11, 26.3% in FY12, 29.0% in FY13, 29.9% in H1-FY14.
- Average order value:
- Internet: $44.1 (Rs 2011) in FY11, $27 (Rs 1299) in FY12, $19.4 (Rs 1064) in FY13, $25.0 (Rs 1501) in H1-FY14.
- TV: $49.5 (Rs 2255) in FY11, $45.1 (Rs 2171) in FY12, $43.4 (Rs 2383) in FY13, $38.6 (Rs 2319) in H1-FY14.
- Contribution to total operational revenue:
- Internet: 1.8% in FY11, 16.2% in FY12, 20.5% in FY13 and 15.9% in H1-FY14.
- TV: 98.2% in FY11, 83.8% in FY12, 79.5% in FY13 and 84.1% in H1-FY14.
Lastly, Homeshop18’s Internet results over a two year period leading up to the filing:
- Q3-FY12: $1.05M revenues, $2.79M loss
- Q4-FY12: $1.35M revenues, $2.57M loss
- Q1-FY13: $1.387M revenues, $3.09M loss
- Q2-FY13: $1.95M revenues, $3.99M loss
- Q3-FY13: $2.69M revenues, $4.40M loss
- Q4-FY13: $2.33M revenues, $3.77M loss
- Q1-FY14:$2.12M revenues, $3.83M loss
- Q2-FY14:$1.94M revenues, $2.32M loss
Truckloads of data here.
So here’s the summary: ecommerce is highly competitive with heavy discounting, is loss making, has lower revenues than TV, lower gross transaction value, lower gross commission, lower average order value. Why is Zee even looking at eCommerce?