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TV shoppers still wary of fakes and frauds
March 28, 2012, Wednesday
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LI Shufeng, a 60-year-old Shanghai homemaker, is a discerning shopper, comparing prices when she can and only making purchases from vendors she trusts. She is also an avid TV watcher.
That's why she recently gravitated to TV home shopping - albeit with a degree of trepidation, given the number of fraudulent TV shopping businesses in China that she's heard about. But having just spent around 300 yuan (US$48) on kitchen utensils from Shanghai SMG CJ Home Shopping, she's impressed. "They were of very good quality. I certainly will buy more stuff from them," Li says.
It's on people like Li that China's shrinking legion of TV shopping networks are pinning their hopes.
While her latest purchase is a far cry from the big-ticket items like BMWs and gold jewelry now up for sale on many TV shopping channels, no one is complaining. The retailers want all the customers they can as their industry embarks on a new era.
A wave of upheaval began around five years ago when regulators at the State Administration of Radio, Film and Television (SARFT) closed down many of the hundreds of TV shopping shows. Some were legitimate, but plenty of others weren't, flogging a vast gamut of goods, no matter how dubious, and casting a cloud over consumer confidence.
Stricter oversight
SARFT stepped in again late last year and banned another 19 TV shopping companies.
Of the 150 or so infomercial and TV shopping networks that remain - that is, those that could prove to the watchdogs that they had at least 10 million yuan in capital to run their businesses - stricter oversight awaits, including a ban on advertising "growth enhancement" drugs, medical equipment and weight-loss products.
The shake-up was a long-time coming, according to experts. "It is not the products the government is worried about, but TV as a means of mass communication," says Yujun Qiu, China retail and consumer analyst at Planet Retail, a UK-based consulting company. Whatever the larger motivation behind the cleanup, "it was a good idea to shut them down because there was a lot of rubbish," notes Paul French, Shanghai-based China chief market strategist and retail specialist of the UK's Mintel Group.
But in a burgeoning economy being hailed around the world as the new haven for consumer goods, the big question for China's TV shopping business is, where to from here? Once considered a maverick in the world of TV shopping, China is now lagging behind other countries.
A case in point: the US, says Erin Armendinger, managing director of Wharton's Jay H. Baker Retailing Center, citing the multibillion annual sales of TV shopping giants there, including QVC and HSN. TV shopping in the US "has definitely evolved and the networks have really pushed the envelope and made the whole shopping experience more real," she states. Cleaning up their industry's poor reputation among consumers is just one of many issues China's TV shopping companies need to address.
Though launched before their counterparts in other countries in the 1990s, TV shopping companies in China account for a miniscule share of national retail sales, at only 30 billion yuan in 2011, or 0.3 percent of the total. In comparison, it's about 10 percent of total retail sales in the US and South Korea and 8 percent in Japan.
Greater variety
Yet TV shopping in China has a lot of advantages over other retail outlets in the country. For one thing, it is able to offer far greater variety and convenience than bricks-and-mortar retailers.
For another, it's a good counterbalance to online shopping. Despite the Internet's growing popularity (it accounted for around 3.3 percent of all retail sales in 2011), not all consumers - particularly from older generations - feel comfortable using a computer for shopping. With at least one television set in every household in China, TV shopping networks have a captive audience.
Armendinger says the experience in other countries suggests that TV shopping has a number of other attractions. "I think it has something to do with being an alternative to the web. It's more interactive, more experiential than what e-commerce has provided," she states. "You have people showing you exactly what a product looks like and different ways to use it. They have real people calling in and talking about what it's like to use the product. And you see on the screen how many products are being sold. So a lot of questions you might have ... are being answered."
Something else that TV networks have that other outlets don't: a following. With TV shopping, Armendinger says, "it's personal. The audience knows the host ... The core customer becomes sort of like an ambassador for the brand, and it becomes credible and authentic."
But TV shopping also shares a problem with other retailers. "The issue with TV shopping in China is exactly the same as with the Internet, which is trust," French points out. "Can you trust them to send you the products? Can you trust that they aren't selling fakes? "
As Qiu of Planet Retail notes, "The trust issue is the biggest obstacle. TV shopping has a very negative reputation in China due to fake products, products that don't match the advertising, hard-to-return products and difficulties with refunds."
There are exceptions, of course. Building trust has, in fact, been a cornerstone of the strategy at Shanghai SMG CJ Home Shopping (or OCJ as it's often referred to locally). Launched in 2003 as a joint venture between state-owned Shanghai Media Group, the largest media company in East China, and CJ O Shopping of South Korea, it's now the country's top TV shopping company, with sales of US$1.15 billion in 2011, up from US$716 million in 2010.
Adapted from China Knowledge@Wharton, http://www.knowledgeatwharton.com.cn. To read the original version, pleae visit: http://bit.ly/GAOj9Z
That's why she recently gravitated to TV home shopping - albeit with a degree of trepidation, given the number of fraudulent TV shopping businesses in China that she's heard about. But having just spent around 300 yuan (US$48) on kitchen utensils from Shanghai SMG CJ Home Shopping, she's impressed. "They were of very good quality. I certainly will buy more stuff from them," Li says.
It's on people like Li that China's shrinking legion of TV shopping networks are pinning their hopes.
While her latest purchase is a far cry from the big-ticket items like BMWs and gold jewelry now up for sale on many TV shopping channels, no one is complaining. The retailers want all the customers they can as their industry embarks on a new era.
A wave of upheaval began around five years ago when regulators at the State Administration of Radio, Film and Television (SARFT) closed down many of the hundreds of TV shopping shows. Some were legitimate, but plenty of others weren't, flogging a vast gamut of goods, no matter how dubious, and casting a cloud over consumer confidence.
Stricter oversight
SARFT stepped in again late last year and banned another 19 TV shopping companies.
Of the 150 or so infomercial and TV shopping networks that remain - that is, those that could prove to the watchdogs that they had at least 10 million yuan in capital to run their businesses - stricter oversight awaits, including a ban on advertising "growth enhancement" drugs, medical equipment and weight-loss products.
The shake-up was a long-time coming, according to experts. "It is not the products the government is worried about, but TV as a means of mass communication," says Yujun Qiu, China retail and consumer analyst at Planet Retail, a UK-based consulting company. Whatever the larger motivation behind the cleanup, "it was a good idea to shut them down because there was a lot of rubbish," notes Paul French, Shanghai-based China chief market strategist and retail specialist of the UK's Mintel Group.
But in a burgeoning economy being hailed around the world as the new haven for consumer goods, the big question for China's TV shopping business is, where to from here? Once considered a maverick in the world of TV shopping, China is now lagging behind other countries.
A case in point: the US, says Erin Armendinger, managing director of Wharton's Jay H. Baker Retailing Center, citing the multibillion annual sales of TV shopping giants there, including QVC and HSN. TV shopping in the US "has definitely evolved and the networks have really pushed the envelope and made the whole shopping experience more real," she states. Cleaning up their industry's poor reputation among consumers is just one of many issues China's TV shopping companies need to address.
Though launched before their counterparts in other countries in the 1990s, TV shopping companies in China account for a miniscule share of national retail sales, at only 30 billion yuan in 2011, or 0.3 percent of the total. In comparison, it's about 10 percent of total retail sales in the US and South Korea and 8 percent in Japan.
Greater variety
Yet TV shopping in China has a lot of advantages over other retail outlets in the country. For one thing, it is able to offer far greater variety and convenience than bricks-and-mortar retailers.
For another, it's a good counterbalance to online shopping. Despite the Internet's growing popularity (it accounted for around 3.3 percent of all retail sales in 2011), not all consumers - particularly from older generations - feel comfortable using a computer for shopping. With at least one television set in every household in China, TV shopping networks have a captive audience.
Armendinger says the experience in other countries suggests that TV shopping has a number of other attractions. "I think it has something to do with being an alternative to the web. It's more interactive, more experiential than what e-commerce has provided," she states. "You have people showing you exactly what a product looks like and different ways to use it. They have real people calling in and talking about what it's like to use the product. And you see on the screen how many products are being sold. So a lot of questions you might have ... are being answered."
Something else that TV networks have that other outlets don't: a following. With TV shopping, Armendinger says, "it's personal. The audience knows the host ... The core customer becomes sort of like an ambassador for the brand, and it becomes credible and authentic."
But TV shopping also shares a problem with other retailers. "The issue with TV shopping in China is exactly the same as with the Internet, which is trust," French points out. "Can you trust them to send you the products? Can you trust that they aren't selling fakes? "
As Qiu of Planet Retail notes, "The trust issue is the biggest obstacle. TV shopping has a very negative reputation in China due to fake products, products that don't match the advertising, hard-to-return products and difficulties with refunds."
There are exceptions, of course. Building trust has, in fact, been a cornerstone of the strategy at Shanghai SMG CJ Home Shopping (or OCJ as it's often referred to locally). Launched in 2003 as a joint venture between state-owned Shanghai Media Group, the largest media company in East China, and CJ O Shopping of South Korea, it's now the country's top TV shopping company, with sales of US$1.15 billion in 2011, up from US$716 million in 2010.
Adapted from China Knowledge@Wharton, http://www.knowledgeatwharton.com.cn. To read the original version, pleae visit: http://bit.ly/GAOj9Z
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