TV home shopping channels suffer worsening bottom line amid sluggish consumption
Lotte Home Shopping hosts sell health foods on its home shopping channel, April 27. Courtesy of Lotte Home Shopping
By Kim Jae-heun
Major TV home shopping channels saw their bottom lines deteriorate further in the second quarter due to rising transmission fees paid to broadcasters and sluggish sales of profitable products such as furniture and home appliances, according to company officials, Sunday.
Among others, Lotte Home Shopping suffered its largest drop in sales during the period, affected by the government's six-month ban of its broadcasting between 2 a.m. and 8 a.m. starting in February this year.
The business suspension had been imposed during the early morning hours due to a violation of the Broadcasting Act in December 2022. However, Lotte managed to avoid a deficit.
Its sales between April and June decreased year-on-year by 15.2 percent to mark 231 billion won ($173.4 million), while its operating profit plunged 92.8 percent to stand at 2 billion won.
“Our operating profit fell largely due to the worsening business environment such as a decreasing number of TV viewers and the suspension of business (in the morning time). We expect our performance in the second half to improve by resuming early morning broadcasts and strengthening product competitiveness,” a Lotte Home Shopping official said.
Hyundai Home Shopping's revenue also decreased 12.5 percent year-on-year to register 264.8 billion won during the same period, due to the reduced broadcasting composition of high-margin service sales such as television rentals and furniture installation.
In addition, Hyundai's operating profit fell by 70.3 percent to 8 billion won, affected by increased costs brought mainly about by the transmission fee. The transmission fee refers to the amount that home shopping companies pay broadcasters every year in exchange for TV channel assignments. Local home shopping firms argue that the proportion of transmission fees paid to broadcasters accounts for nearly 60 percent of their expenses currently.
GS Retail's home shopping channel GS SHOP is not in a good position either.
Both its sales and operating profit in the second quarter of this year declined 12.5 percent and 15 percent, respectively, to mark 286.3 billion won and 27.3 billion won. Yet, GS SHOP managed to maintain its operating profit rate at 9.5 percent during the same period, which is the highest among the four major companies: CJ OnStyle (5.4 percent), Hyundai Home Shopping (3 percent) and Lotte Home Shopping (0.8 percent).
CJ OnStyle did better. While its competitors' operating profits fell by two digits, only CJ's fell by one digit.
CJ OnStyle's sales decreased year-on-year by 1.7 percent to 345.7 billion won, and its operating profit declined 4.2 percent to mark 18.7 billion won.