CEO & Founder | 02 Sep 2011
Television is established now. E-commerce is where we are seeing lots of activities in terms of overall Internet penetration. By 2015, India is going to have close to 295 million Internet connections. So it is logical that you keep investing in the brand and product of e-commerce. Anyone who has seen the product on TV, the Internet works for him as a catalogue. Anyone coming to the Internet, who wants to have a feel of the product, can go on to the TV channel. So you are right that we are pushing e-commerce more...
Sundeep Malhotra is the Chief Executive Officer & Founder of HomeShop18, India’s first 24-hour home shopping channel and virtual retail enterprise from the Network18 Group. He has successfully built leading home shopping TV channel and e-commerce business for Homeshop18.
A veteran in the retail sector, Malhotra conceptualised and established the home shopping industry in India, which today has become an accessible retail platform and credible retail avenue for shoppers and brands.
Malhotra has 20 years of retail and FMCG experience. Prior to Homeshop18, he was the Executive Vice President Sales for PepsiCo India. Earlier to Pepsi, he had a five-year stint with Benetton India as their Head, Sales & Marketing, for the Indian Sub-Continent and a 10-year stint with Bata India Ltd across various functions, from Brand Management to Retail Head.
In addition to this,. Malhotra is currently the Co-Chairman of FICCI’s Retail Committee. He has been recognised by numerous awards – in 2011 Asia Retail Congress has awarded him ‘CEO of Year 2011’ among Asia’s top 50 CEOs. He has also been felicitated with Indira Super Achiever Award 2010 by Indira Group of Institutes and many more.
In conversation with Ashish Pratap Singh, Malhotra speaks about the acquition of Coinjoos and the efforts behind building up the books offering, the e-commerce market in India, Homeshop18’s invest and expansion plans, and more...
Q. Homeshop 18 recently acquired Coinjoos.com in an all cash deal. Please tell us the thought behind it and how this acquisition will further the vision of the company?
Right from the beginning, the idea was to build a virtual retail environment. We started off with television and then the logical extension was the e-commerce part of it. Right from the beginning we were very clear that we will build a vertical in e-commerce, and not be very category specific e-commerce. We started with tougher categories rather than logical categories of books, because books are easier to sell and engage from an e-commerce point of view. We came in and did the tougher part first, which was building infrastructure and width of categories in which we currently operate. We have got 6 million customers in our CRM and 3 million were active shoppers. That gives us strength that now we need to take e-commerce in totality. One category that was missing was books. We were looking at a partner who would bring in the domain knowledge. Coinjoos was a logical fit there. Out of all the companies that we evaluated, we found Coinjoos. It had a team with tremendous domain knowledge. Second, over the last few years they have built technology which is at the par with one of the best. And third, I think they are hungry to grow the books category. Hence, they were a logical choice.
Q. Coinjoos as a brand is discontinued and the books business will be merged with Homeshop18. What was the intent behind this?
Acquisition is done for two things – one is if there is a gap in giving your technology service or if you need a brand which has following. In our case we were not acquiring a company to bring in the customer base. We already have the largest customer base in the country. It was from a brand point of view. Homeshop18 is much stronger than not only Coinjoos, but most other e-commerce players put together. We were looking at a partner who had the domain knowledge and was a category expert both in terms of expertise and technology that could become an added value to whatever Homeshop18 has. That was the sole reason to bring it in Coinjoos and not running it as a sole brand.
Q. That is why I think Mr Gupta, who was earlier Head of Coinjoos, has joined Homeshop18?
He and his entire team is now part of Homeshop18. And yes, we are getting skills of books business from them. We will be launching our books business in October, targeting to be there with the offerings around Diwali.
Q. Apple asked Homeshop18 officially to not sell iPhone 4 on their website. This was because Homeshop18 was selling it even before the phone was officially launched in the Indian market. Why did the company do that and did it stop after Apple’s intervention?
We are a market place and a platform. They bring their products and we sell it from our platforms. And that is exactly what happened with the Apple products. Apple, as you know, sells through registered dealers. Yes, Apple did ask us to stop selling product. They first wanted us to become registered franchise. We both were surprised at the kind of response the Apple product got from our platform. Thus, Apple requested that it would be better if we became registered retailers with them. And that process is currently on and if the company itself wants to directly work with us, we are ready for that.
There are many companies who don’t sell directly. Take a mobile company, for instance. Both things happen. Either the brand that has licence to sell directly comes on board. And if they can’t sell directly, they come through registered dealers. As long as the brand stands for the guarantee of every product, these things really don’t matter. For us, there are three critical things. One, whatever be the proposition, it should be the best. Second, the brand has to assure that there is proper guarantee after sale. And third, the product is genuine. These three things are paramount for us at Homeshop18, whether they are sold from the company directly or its registered dealers that really doesn’t matter.
Q. Homeshop 18 recently raised Rs 100 crore from existing investors and plans to raise another Rs 200 crore in the future. Can you elaborate on how this raised capital is going to be used? Are there any new expansion plans that the company is going to undertake?
It was regular funding that had to happen in the course of the business. So far that is ok. But will we be needing more money? Yes, we will need. Will we be needing Rs 200 crore? Don’t really know. So far, the funding is done by existing investors. But yes, going forward we might look at bringing in one more investors into the fold. The indications are that there are many people who want to invest in Homeshop18.
Q. How are you planning to use the capital raised?
The area of focus will be on brand building, marketing and consumer engagement. Secondly, we are going to invest in our IT platforms, so that whatever we invest today should enable us to keep growing for next 2-3 years. The third area is going to be in terms of infrastructure building.
Q. Tell us a little about the hottest selling product categories, newly included ones and the ones that you are planning to get into shortly.
There are many categories actually. For instance, take mobile. We are selling close to 120,000 mobile handsets in the market. Cameras is another category. We are close to 5 per cent of the total camera market. Apart from it, apparels is picking up big time, and this is the category that we are going to further expand. Health and beauty is another category where we would like to get into.
Q. Turnover of the company has grown to Rs 413 crore in 2010-11. That’s Rs 21 crore over the last year’s revenue figure. What do you attribute this to? What are the projections for this financial year and how well has the performance been so far compared to them?
I think these are not right figures. In three years, we have grown from zero to Rs 400 crore. This is our fourth year and we are looking at doubling it.
Q. Homeshop18 is rebranding and also realigning its vision. What was the thought process behind it? What do you plan to achieve with this?
Television is established now. E-commerce is where we are seeing lots of activities in terms of overall Internet penetration. By 2015, India is going to have close to 295 million Internet connections. So it is logical that you keep investing in the brand and product of e-commerce. Anyone who has seen the product on TV, the Internet works for him as a catalogue. Anyone coming to the Internet, who wants to have a feel of the product, can go on to the TV channel. So you are right that we are pushing e-commerce more because we need not promote TV.
Q. Please tell us something about this expansion experience?
It’s been a fantastic experience. In the nine months since we really started focusing on e-commerce, we are actually seeing doubling up of the business. From 200 transactions in a month through the Internet to close to 3,000 transactions in a month – in last nine months’ span. And we are looking at doubling it in 4-5 months. We are also very surprised at the width of categories that our customers are engaging with on Homeshop18.com. And that is where we get the confidence of investing behind in it and taking it to the next level.
Q. How is the customer profile different from a person ordering stuff from TV and to another from website?
Most Indian customers are value conscious. From that point of view, there is not really any difference. If I really have to differentiate, anyone who comes from TV is hundred per cent impulse shopping decision. Anyone who comes on the Internet is a predetermined shopping decision. So, from that point of view, the shopping behaviour is a little different. If I have to put them in a category – the television user is 35-plus, while on the Internet, he is below 30 years, across male and female. From that point of view it is a younger audience that comes on the Internet.
Q. How you are exploring to enhance customer experience on the Web?
It starts and ends with technology at some stage. Second, is the product we sell. We are not in the business of selling unbranded products. We sell genuine products with genuine brands. Also, worth noting is the infrastructure that we have built – I think we are the only ones to have a dedicated call centre with about 600-700 people. Also, the reach that we have built with our logistics in 3,000 cities, and building cash-on-delivery in the widest parts of the country. Lastly, whether it is on TV or the Web, we give 15-day money back guarantee. Having said that, there is still so much to do in terms of improving the customer experience...
Q. Tell us a little about your marketing strategy for this year and any hurdles that you might have faced in executing them.
The hurdles are building credibility of domain – of buying virtually. We may have transacted with lots of customers, but as a percentage of entire Indian population, it is still miniscule. So I think we still have a long way to build that trust and credibility. In terms of improvement, we would like to deliver faster and better.