Chinese home appliances retail giant Gome plans to invest CNY1 billion to enter China's TV direct sales sector and the business is expected to start at the beginning of 2009.
With regards to the business range and operating model of Gome's TV direct sales business, Zheng Jichong, president of the newly established Gome Online Co, Ltd, says those details are currently not available. However, he says the entry of a large retail company into the online shopping business is a trend. Gome owns 1,300 retail stores and a nationwide distribution and service system in China. The company can take advantage of these resources to enter the TV direct sales market.
A senior representative from Gome says as the sales within the appliances chain channel declines, Gome is seeking emerging channels and e-commerce and TV direct sales are important parts of Gome's sales channel construction. At present, the sales generated via Gome's online store have reached more than CNY400 million annually.
Commenting on the new move of its competitor, Suning says they are not interested in TV direct sales. According to Suning's president Sun Weimin, the company has never considered entering the TV direct sales market and will always focus on the development of its retail stores.
According to the latest report on China's TV direct sales, in 2007 the scale of China's TV direct sales market reached CNY7 billion, a year-on-year increase of 55.6%. However, the TV direct sales industry is also facing severe competition pressure from the traditional retail channels and new retail channels such as online shopping, according to the report from Analysys International. At present, TV direct sales operators are trying to find new strategies and some of them have launched multi-channel retail systems, covering online retail businesses, mail-order businesses, and phone sales, based on their resource advantages. In 2007, the sales made through non-TV channels accounted for 13.5% of the total revenue of these operators.
At the same time, the structure of TV direct sales changed over the past year. In 2007, Acorn International topped the Chinese TV direct sales market with market share of 17%, followed by Happigo and Orient CJ with market share of 13% and 12%, respectively while CNTVS, originally a representative of the information advertising model, fell to the fourth position as the new home TV shopping model rose in the recent two years.
The report points out that in the current Chinese market, there is a development trend that the domestic demand will promote the economic growth of China. The manufacturers are eager to find effective ways to motivate the sales channels and the purchase ability of Chinese consumers continues to improve. On these conditions, China's TV direct sales industry is expected to maintain continuous growth. In addition, China's supervision over the TV shopping industry is enhanced, which will lead the industry to a healthy development.
Other outside factors have also recently affected the growth or television direct sales. Chinese TV shopping company Acorn International says its net revenues for the second quarter of 2008 were USD47.2 million, a decrease of 25.4% compared to USD63.3 million in the second quarter of 2007, partially because of the devastating Sichuan Wenchuan earthquake earlier this year. Its decrease in direct sales net revenues was also largely due to a 74.7% year-over-year decline in sales of mobile handsets, despite growth in its GPS products, cosmetics and posture correction products.