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HomeShop18 announces free shipping on all orders; is it sustainable?

HomeShop18Network18's teleshopping and e-commerce arm HomeShop18 has announced free shipping on all orders made across TV, mobile or web. The free shipping is irrespective of the amount, which means there doesn't need to be a minimum order value to avail the facility.

With this, the hybrid shopping network probably becomes the only ecom player to offer free shipping outright. While most other peers also offer free shipping, they require a minimum order value upon which the shipping is made free else there is a fixed additional cost for shipping. This is seen as critical for meeting logistics costs as margins of low value products may not be enough to make it a profitable transaction for the e-tailer.

Though Amazon has also offered free shipping for orders fulfilled by its own network in recently launched India-specific marketplace, it is a limited period offer.

"Now, even a book worth Rs 100 can be bought at our portal without paying any shipping charges," said Sundeep Malhotra, founder and CEO, HomeShop18.

HomeShop18 has not specified if it's a festival period offer to boost sales. Last we checked with the company and the firm said it is not a limited period offer. Either ways, it may take some hit on margins with its latest move. This comes just a day after the firm said it improved margins in HomeShop18 in the last quarter.

Network18 Media & Investments' digital content and e-commerce business showed a sharp improvement in operating margins with an EBITDA loss of Rs 9.3 crore against Rs 37.7 crore in Q2 FY13 (quarter ending September 30 2013) and Rs 43.5 crore in the first quarter of the current financial year. The arm comprises of Homeshop18 and BookMyShow along with a string of news sites.

HomeShop18, in particular grew 65 per cent over the year-ago period while its revenue tripled from the previous quarter.

Since BookMyShow is already profitable, the improvement could be largely attributed to lower losses for HomeShop18.

HomeShop18

Earlier this month Homeshop18 raised $14 million (Rs 87 crore) from GS Shopping, OCP Asia Ltd (OCP Asia) and Network18. The transaction valued HomeShop18 at $360 million (Rs 2,230 crore). This has brought in fresh cash for HomeShop18 which might explain the move to do away with shipping charges even for small value orders.

Looked at it from the business angle, the move would affect only margins from small orders. If the proportion of orders for basket with smaller ticket value is tiny fraction of the overall mix the move may not mean big hit for HomeShop18 while possibly driving fresh consumers. It would however pump up competition for other e-com firms.

The end result would also depend on the pricing of products on HomeShop18. If the smaller value items are already priced higher than comparable products on other sites it may end up being a zero sum game.

We are trying to get more details on the move from the top management and will update the post as we get more information.

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