T-commerce sercvice faces decline as viewership habits change

[Chung Chan-dong’s illust.]

T-commerce, a service that allows viewers to purchase products through dedicated remote controls while watching TV broadcasts, is experiencing its first significant downturn in South Korea. The decline in sales for TV home shopping networks has also been consistent for three years, as the post Covid-19 panedmic world results in falling viewership levels and more outdoor activities.

According to an association of T-commerce companies, five major players (SK Stoa, KT Alpha, Shinsegae Live Shopping, Shopping NT, and W Shopping) are expected to witness a drop in sales via TV broadcasts to about 4.15 trillion won in 2023, a decline of about 3.84 percent from a year ago.

Total sales for this year are forecasted to hit 1.11 trillion won, or a 10.05 percent fall compared to the previous year. This is the sector’s first drop in sales in the eight years since SK broadband and Shinsegae Group entered the market in 2015. With operating profits dropping to around 3 billion won, breaking even has become a challenging prospect.

The growth trajectory of T-commerce was already slowing down in the past year, with modest growth in the 3 percent range. Sales have consistently been declining since the second quarter of 2022, or six consecutive quarters.

The TV home shopping market is also experiencing a similar contraction, with seven TV home shopping companies seeing a decrease in their broadcast sales over the last three years. Sales hit 3.15 trillion won In 2019, but this number dropped 1.8 percent to 3.09 trillion won in 2020.

Sales in 2021 decreased by 2.5 percent compared to the previous year, and last year’s sales saw a 3.7 percent reduction, falling to the 2 trillion won range.

In response to these challenges, the T-commerce industry has requested permission to conduct live broadcasts, allowing them to configure the broadcast screen size more flexibly, but opponents of this idea are concerned that it may exacerbate the overall crisis facing TV-based distribution channels. With broadcast sales of TV home shopping on a three-year decline and the T-commerce industry considering entering the TV home shopping market, there are fears that intense competition will lead to declining profitability.

The Korea Federation of Small and Medium Business (KFSMB) also expressed its intention to start its own T-commerce channel, which has raised concerns about the potential oversaturation of the market. The federation stated the need for a channel to expand the sales channels for small and medium-sized businesses in February 2023,

If KFSMB does start its own T-commerce channel, it is highly likely to become a part of the publicly owned TV home shopping channel, Home & Shopping, in which the federation holds a significant stake. In this scenario, the number of domestic TV home shopping and T-commerce channels will increase from 17 to 18, further intensifying competition in the market.