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 Home shopping channels may have some detractors, who complain of low quality products and cheaply produced infomercials, but the industry is clearly doing something right, with sales estimated at over $12 billion a year worldwide. In the Middle East, the industry is still in its infancy, though it seems destined for a bright future as infrastructure, credit cards, and technology become more widespread.
Home shopping on TV, or “electronic retailing” as it’s known in the industry, had an unlikely start in 1977 when a local radio host in the U.S. was asked to sell 112 can openers live on the air.
The station’s owner negotiated a deal with a local company to trade the can openers for ad time. Owner Bud Paxson and host Bob Circosta were taken aback when all the can openers sold within the hour.
Paxson sensed he had discovered a money-maker. In 1982, he founded the first shopping channel on cable television, later known as the Home Shopping Network (HSN). Circosta became the first home shopping TV host, launching a 30-year career that would total more than 20,000 hours on air and $1 billion in product sales. That’s billion with a B.
France was the next country to see the possibilities, with Britain, Germany, Italy, Japan, and India soon hopping onto the bandwagon. As cable television and credit cards become more widespread, home shopping gave them a new opportunity to sell their products. The Middle East joined the party relatively early on, as well – in Lebanon following the civil war.
“People were afraid to go out, so it was positive for us,” said Afif Jaroudi, Managing Director of Thane Direct - Lebanon. His parent company, Thane International, operates home shopping channels through franchises in 130 countries.
 “The basic idea of tele-shopping came 12 years ago when people started to accept products from TV, not just the souk,” says Jaroudi. “As the saying goes, ‘it takes time to sell a fish in the sea.’ People need to see the product.”
Based in Saudi Arabia, and with subsidiary operations throughout the region, Thane Express is aired on the Arab and Nile satellites. Thane receives infomercials from its parent company that are videotaped in the U.S. and then translated and dubbed in Beirut for the regional market. Two to thirty minutes of airtime are allocated for items such as sports equipment, household products, and health supplements. They generally range in price from $35 to $350.
Home shopping specifically tailored to the Arab market began in 1995 with the launch of Citruss TV, the brainchild of German entrepreneur Michael Trüschler, now based in the Dubai Media City.
 “I studied business administration and had seen the success of home shopping in the U.S. and Europe,” says Trüschler. “So I thought ‘let’s look at regions where it had not started yet.’ In the Middle East, home shopping is very much at the beginning.”
Citruss TV’s core market is the Gulf Cooperation Countries (GCC) – as it is for Thane Express and last year’s newcomer, Saudi Arabia-based U-Mark TV – due to the region’s higher income and collective trade agreements that allow for easy distribution of products.
Citruss initially promoted luxury products, horses, and real estate, but moved toward the individual consumer market when that sector began to take off. Of the 30 to 35 different products Citruss offers every month, Trüschler says the bestsellers are whitening creams, hair products, and baby strollers.
The sales presentations are repeated three times a day. And, unlike other channels, Citruss produces its own shows – with Arab presenters, models, and guests. “It is more costly, but we can put any products we like on TV,” notes Trüschler, “whereas others are limited.And viewers can identify themselves with the product. It has a different taste, and looks less cheap.”
Trüschler cites recent independent research as confirming that Citruss gets some 250,000 viewers a day, of which 60 to 70% are female. “The core target is women between 25 and 34 years old, and usually married with two kids,” he explains. [If Trüschler’s numbers are accurate, then 30 to 40% of home shopping viewers are male, which is very interesting – Editor]
Trüschler says that growth of the channel is strong at around 5% per month. “In 2006, we had more than ten-fold growth in our revenue, so the potential is huge here in the region.”
In the Levant, the story is somewhat different, as Thane’s sales in Lebanon have been affected by the country’s political instability and economic downturn. Still, Lebanese cosmetics manufacturer Amana Care says that infomercials have proven to be an effective way of communicating with potential customers.
 The company airs several four-minute to five-minute infomercials daily on six TV channels. Due to the high costs of producing and airing infomercials, however, Head Pharma-cist Dr Rami El Jamal says the profit margin has been limited. Although El Jamal would not say how much the infomercials cost to produce and air, he still points to what he describes as “significant sales growth” due to the TV spots. He says it requires the addition of 30% more staff every year since the company started aggressively marketing three years ago.
CHALLENGES
Despite the growth of the sector, certain obstacles are hindering the industry’s development. Thane’s Afif Jaroudi says that due to widespread illegal cable connections in Lebanon, providers have become increasingly strict about which channels each home will be allowed to receive. As a result, shopping channels are often not part of the package.
“Around 90% of Lebanese don‘t have their own dish,” says Jaroudi, “so I decided to also air on terrestrial channels.” However, deciding which Lebanese channel to choose for airing his shows continues to be complicated. He has to take into account the country’s sectarian and political differences. “If Thane was on Future TV, people would say this company is with the Sunnis and the Hariris, so the Shia wouldn’t buy it,” explains Jaroudi. Thane’s products are now offered two hours a day on NBN.
Thane doesn’t face these issues in its core market of Saudi Arabia. And in that country, most people own their own dish.
The issue of attracting a wider audience drove Citruss to begin airing one hour shows on MBC last year. The extra exposure increased sales by 50%. Citruss followed this in September by inking a one year agreement with MBC4 to air a one-hour show five days a week.
“There are around 200 channels on satellite, so the problem is getting viewers,” says Trüschler. “So we thought the best way was to use a big network and put our shows there. MBC has the biggest viewership in the region, and MBC4 has a good female viewership.” Trüschler says he is also looking at two or three other outlets.
Aside from the difficulty of attracting viewers, home shopping channels face continuing reluctance by consumers to purchase products online or even by telephone. They also have to cope with the region’s traditional, cash-based economies.
“Home shopping normally works by credit card purchases. But here, people are reluctant [to use credit cards], except in Kuwait,” explains Trüschler. “So a big aspect of the business is driven by cash collection – only about 15% by credit card payments.”
Trüschler says that lack of trust in credit cards “is the biggest problem you face in this kind of business.”
Postage is also an issue, especially in Saudi Arabia and Lebanon, where streets are often not named and areas lack effective infrastructure. There is also some unwillingness by companies to entrust their products to the postal service. “The postman doesn’t know anything about the product, so it’s best to send my own employee to explain,” says Jaroudi.
Such issues are also holding back the growth of mail order shopping, a multi-billion dollar industry in the U.S., Europe, and Japan. Mail order shopping is often seen as complimentary, and sometimes in direct competition, with television’s home shopping channels. It’s such a new field, that Saudi Arabia held its very first “direct mail forum” in September of this year.
 THE FUTURE
Although the future of the industry is dependent on improvements in infra-
structure and a surge in credit card usage, companies are positive about their long-term prospects.
Citruss has embarked on a program to encourage consumers by offering new products, credit cards, and so-called “loyalty cards.” They intend to upgrade their online services and eventually offer live programming.
“There are a lot of things that can drive the business,” says Trüschler. “The potential is huge. But on the other hand, the market entry barrier is there. The next step would be to go to Egypt [and] Lebanon, but there are lot of issues, such as customs.” Trüschler says the potential is big in these countries, “but we want to focus on the GCC.”
As other regional economies open up, perhaps live home shopping could become as popular and profitable as it is in the U.S. and Europe. In the meantime, the number of home shopping channels that have the ability to survive remains to be seen.
After all, there were 60 or more home shopping channels in the U.S. in the late 1980s and early 1990s. Today, there are a handful, with channels QVC and HSN commanding some
$8 billion in revenues worldwide.
That’s billion, with a B. |
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