CJ Homeshopping success in China based on consumer trust: CEO

By Lee Joon-seung
SHANGHAI, March 23 (Yonhap) -- The success of SMG-CJ's Homeshopping network in
China has been based on acquiring consumer confidence and the use of distinct
marketing strategies, the company's CEO said Monday.

The business, established as a joint venture between South Korea's CJ Group and
China's Shanghai Media Group (SMG) in 2004, is the largest TV homeshopping
company in the country, providing services to over 10 million households mainly
in the greater Shanghai area. It is 51 percent owned by SMG and 49 percent by CJ
with the latter reserving the right to appoint the CEO.
As of 2007 its market share was estimated at 1.6 billion yuan (US$234.4 million)
out a total 16.7 billion yuan market with profits reaching around 15 billion won
(US$1.0 million). The company grew an average 80 percent on-year since it was set
up.
"The homeshopping market when SMG-CJ first opened was not trusted because of the
poor quality of products sold and initial lack of government oversight that
caused a huge increase in the number of businesses entering the field, triggering
problems for both companies and buyers," said Kim Heung-soo, the company's head.
He said conditions actually benefited late starters, since SMG-CJ from the outset
focused less on profits and concentrated on quality.
"Usually, homeshopping networks market mid-to-low range merchandise, but we sold
mid-to-high end goods with emphasis on rigorous quality control and after sales
services," he said, pointing out that in many cases, products sold by SMG-CJ are
accepted as being of top quality by retailers like Carrefour.
He said one measure adopted to ensure high quality was to sell brand-name
electronics made by Samsung, LG, Sony and Philips that had less profit margins,
but helped build confidence. SMG-CJ also arranged numerous roadshows to get
closer to consumers in Shanghai.
"As a result of such efforts the company did quite well last year in selling gold
bars that are much sought in the country and other items, even though prices were
not cheaper than those sold on the regular market," he said.
For the future, the executive said efforts are underway to expand the number of
households that could buy products to 30 million by moving into the nearby
Fujian, Jiangsu and Zhejiang provinces that have a population of around 150
million. The three provinces are the most affluent regions in China and have
considerable buying power.
Kim said that SMG-CJ's success has sparked interest among both Chinese and
foreign media companies that are struggling to find new business opportunities in
retails and distributions.
"Because many media companies rely heavily on ads they are struggling to cope
with the worldwide economic slump that have forced many manufacturers and service
providers to cut back on advertisement-related outlays," he said.
The executive said that India and Hong Kong companies are moving to learn from
the SMG-CJ business model, with stiffer competition expected from local rivals
like the homeshopping network operated by Hunan Province TV, the runner up in the
Chinese market.
He predicted the current boom in the homeshopping business will again lead to
saturation with mergers and acquisitions likely to take place in 4-5 years. If
such a development occurs, it could open new opportunities for SMG-CJ to increase
its market presence that is largely tied to access to TV air time.
The executive, however, said that the Chinese market requires considerable
attention and planning since other South Korean conglomerates that have entered
the market have not done as well.
"GS group's venture in Chongqing has not grown significantly while Hyundai
Homeshopping Co. has pulled out of the country altogether," he said pointing out
that despite advances there are still limits that need to be overcome including
restrictions on delivery of products outside of the Shanghai region and the
problems with payment that are almost exclusive carried out in cash on delivery.
The company, meanwhile, acts as a steady seller of South Korean made goods that
account for 17 percent of all sales.
yonngong@yna.co.kr
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