When India's leading broadcast network Star India announced last month that it was exiting the Star CJ joint venture (in favour of Providence Equity) which it had set up with South Korean home shopping major CJ O Shopping, observers wondered about the course the four and a half year old company would take in the Indian market.

The two had over that period established a 24x7 home shopping channel called Star CJ Alive, which reaches more than 50 million homes, a web-based portal StarCJ.com which allows third party sellers to list their products for sale, and had managed to attract more than 5 million shoppers.

A large part of that acceptance in India was on account of  Star. The latter has a lot of clout thanks to its large channel bouquet,  giving  it lots of leverage in India’s highly competitive broadcasting and fragmented cable TV markets. And then there is the credibility of the Star brand with Indian viewers, especially housewives, who bought products from TV because of that trust.

The question was: would Star CJ Network be at a disadvantage without Star?

Star CJ Network India CEO Kenny Shin does not think so. He says that the joint venture has about a year before it will have to drop the Star tag. Already, the company has designed a new mascot ‘Shoppie’ which will work at bridging the gap between the current name and until the new name is finalised. “The name has to be such that consumers can connect with it as Star will be moving out of the brand name,” says Shin. “However, Star India was only a financial investor. It was we who were managing the business and we are extremely optimistic about the market.”

Indeed it was Star India ad sales and distribution president  Paritosh Joshi who had been deputed by CEO Uday Shankar to lead the Star CJ joint venture in its early days. But Joshi got the company on its feet and running and quit in 2012, after handing over to Shin who has been at the helm since.  

For the south Korean firm which is the second largest home shopping company in the world, India is among the high growth and focus markets, after China, and hence it is imperative that its India play pans out right.  

Global home shopping leader QVC Home Shopping (part of Liberty Interactive) turns over $8-9 billion each year,  CJ O Shopping which notched up revenues of $4.6 billion has a lot of catching up to do; though its vice-chairman Miky Lee is gunning for global leadership status by 2020. Apart from China and India she is driving the company towards expansion in other markets such as Vietnam, Indonesia, Japan, Philippines, Thailand, Turkey and even Latin America.

CJ O Shopping believes it has a good partner in Providence to help achieve its ambitions in India. Says Shin: “We have a long term partnership with Providence. Their global average investment relation is an average six years. That’s a long time. Providence also has knowledge of the business with their investment in the German shopping channel.”

Home shopping in India is about a Rs 2000 crore opportunity today and Star CJ Network accounts for about 35-40 per cent of that. And that despite the fact that the 700 employee strong company is working in a restricted manner in India as compared to other territories. Because of foreign direct investment restrictions, which prohibit multi brand retail in the country, Star CJ operates as a wholesale cash and carry company. Viewers call in after watching the product capsules on Star CJ Alive to its call centres which then pass on the order to one of the five franchises it has appointed nationally. These then deliver the products to the home shopper through logistics partners.

Star CJ on its part handles the backend, which includes content creation for the television channel, product selection, procurement, warehousing and marketing. An extremely efficient ERP system works as the glue for the whole operation.

Headquartered in Mumbai with three studios and three control rooms, it has offices in Delhi, Chennai, Bengaluru and Ahmedabad as well.  Warehouses are located in Delhi-NCR, Bengaluru and Mumbai.

It has plans to open a warehouse in West Bengal at an investment of about Rs 2 crore by 2015 in order to ensure fast delivery in the eastern part of the country, apart from establishing a more efficient warehouse and logistics management system.  About 70 per cent of its revenues come from urban India and it delivers to more than 4500 pin codes.

Currently the company has a little less than 2000 products from 210 brands. 49 per cent of the products are Indian such as Satya Paul, Tanishq, Asmi, Videocon;  26 per cent are international brands such as FILA, BlackBerry, LG, Canon, Dell, Sony, Samsung, Adidas, Reebok and the remaining 26 per cent are exclusive Star CJ brands such as  Malhar, Sharika.  20 per cent of transactions are accounted for by kitchen appliances followed by 17 per cent contribution from both IT/cameras and small appliances. Fashion trails at 14 per cent.

All the products go through a quality test and are put through sampling by 20 customers. If they meet with approval, they get onto the Star CJ catalogue. Despite this rigorous filtration process, products are returned to vendors and providers if they don’t move fast from the warehouses.

The average customer transaction value is around Rs 3000 currently, reveals Shin. He is hoping to take this up by bringing in more international brands as well as travel goods.

Revenue has been growing at a rapid clip of about 50 per cent annually and estimates are that Star CJ Network clocked in Rs 800 crore in sales last year. Estimates are that more than $100 million has been sunk into the venture and losses are at about half that. Shin, however, is sanguine of breaking even this year and has set his eyes on $1 billion in sales by 2018-2019. 

Shin’s predecessor Joshi believes that the numbers are achievable, keeping in mind the buoyancy amongst India’s consumers.

“About 55 per cent of India’s GDP is consumer spending. This accounts for about $1 trillion. Of this 20 per cent is accounted for by organised retail. Estimates are that the home shopping business is going to swell to $10 billion, leaving enough room for many players,” says a media observer.

Indeed, Star CJ Alive’s closest competitor- Network18’s HomeShop18- has already applied for a listing and public offering on the New York stock exchange. Shin says he is hoping to get Star CJ Network listed on the Bombay Stock exchange in about three years.

Currently, Star CJ Alive can be viewed on almost all the DTH platforms Tata Sky, Dish TV, Videocon d2h and Airtel Digital; the only one it has not managed to get on to is Sun Direct. It has deals in place with the major multisystem operators such as Hathway, Den Network, Fastway, GTPL and Siticable. Again it has not managed to get carriage on major MSOs in south India.

The lack of distribution in the south has meant that only 10 per cent of the company’s sales emanate from there. But Shin believes that this will be overcome in the not too distant future when the channel will start beaming its product capsules in regional languages. The company will be seeking governmental clearances for the same in terms of licensing. “We are looking at a regional expansion in the next two years post our rebranding,” he says.

Around 5 per cent of its total sales come from its starcj.com portal, with 65 per cent of the traffic coming from users on PCs and laptops. The remainder log on to the portal from their mobile hand phones or tablets. Shin wants to double and treble revenue from starcj.com over the next few years. A mobile app is being developed to make mobile shopping an easier experience for shoppers.

“Looking at the change in the consumer behaviour in India due to the penetration of online shopping, we intend to strengthen our presence online and reach out to a wider consumer base, ” Shin had told indiantelevision.com sometime back. “TV home shopping is however going to be our linchpin.”

Shall we say amen to that?