Home Shopping Shines Amid Crisis... 3 Companies' Operating Profit Average Growth Up 56%

Weak Performance in Q3 Retail Sector
Strengthening Competitiveness of Non-Face-to-Face Channels
Three Pillars: Health Supplements, Food, and Living
High-Profit Products Like PB as Key Drivers

[Asia Economy Reporter Cha Min-young] While the distribution industry has been struggling due to the novel coronavirus infection (COVID-19), the home shopping industry achieved remarkable results in the third quarter. This was thanks to a combination of increased sales of food and health functional foods through non-face-to-face shopping channels, growth in high-profit product sales, and efforts to improve efficiency such as reducing selling and administrative expenses.

According to the industry on the 7th, the operating profits of the three major home shopping companies?CJ O Shopping, GS Home Shopping, and Hyundai Home Shopping?in the third quarter grew by an average of 56.2% (simple combined average) compared to the same period last year. CJ ENM Commerce Division’s operating profit was recorded at 42.4 billion KRW, a 44.2% increase from the previous year, while GS Home Shopping’s standalone operating profit rose by 94.3% to 38.3 billion KRW. Hyundai Home Shopping’s standalone operating profit increased by 30.0% to 34.8 billion KRW.

All three companies commonly saw a notable increase in online shopping due to social distancing measures caused by COVID-19 and sales growth during the prolonged rainy season, which led to increased transaction volumes. The rise in the proportion of high-margin products such as private brands (PB) and a decrease in selling and administrative expenses also significantly boosted operating profits.

First, flexible merchandise planning (MD) tailored to the COVID-19 situation was cited as the primary contributor. In the third quarter, CJ O Shopping’s product portfolio was heavily weighted toward food and household goods (36.6%), followed by apparel (20.0%), beauty and cosmetics (17.1%), fashion accessories (7.6%), and interior goods (5.8%). GS Home Shopping also saw a decrease in the share of apparel and beauty products, but the shares of food and daily necessities increased by 6 percentage points and 5 percentage points, respectively. Hyundai Home Shopping’s TV broadcasts performed well in the order of food, kitchenware, and home interior.

One common characteristic was the growth in the mobile sector. For GS Home Shopping, mobile shopping reached 629.2 billion KRW, a 15.7% increase year-on-year, driving the overall transaction volume. TV shopping accounted for 360 billion KRW, and internet shopping (PC) was 78.9 billion KRW. GS Home Shopping’s mobile shopping app recorded 38 million downloads excluding duplicates. CJ O Shopping’s digital division sales also rose by 24.7% to 155.2 billion KRW, offsetting the 21.2% decline in TV division sales. Other division sales were 148.2 billion KRW, down 7% from the previous period.

Additionally, sales of private brands (PB) are also on the rise. CJ O Shopping’s transaction volume for brands such as 'The Edge,' 'Odense,' and 'Secret' increased by 12.8% compared to the same period last year, accounting for 11.7% of total transaction volume. This is analyzed as an improvement in profitability focused on high-margin products. In the fourth quarter, the company plans to strengthen its product portfolio centered on fashion, living, and home appliances and expand its PB offerings.