As indicated by typical sales data, the demand for TV sales platform products seems to be shrinking in the past several years due to price pressure, while the sales of companies in this sector seem to have been able to gain support by lowering price of products. There is a signal indicating that the demand may be rebounding in 2018.

Sector’s current, trend, causes behind trend, and future

Current and Trend

• The demand, from TV platform shoppers, for merchandise products seems to have been weak and presented downturn trend in the past three years as indicated by the continuingly declining customer’ visits and thus the sales of those typical retailers in this sector.
• Deceasing visits have caused increasingly intensive competition on price. And companies have been focusing on competition of lowering shipping costs.
• It seems that the continuingly declined price, as a result of promotion or markdowns of price, has been playing key role in keeping sale volume at high level for some of companies so far.
• However, general pressure on price is hurting profitability of companies across all industry. Sales volume of those companies will not be able to be maintained by continuously lowering price if unfavourable industry environment continues.
• Fortunately, however, it seems that climate in retail industry is changing and demand is getting stronger in 2018.
• While sales from TV platform decline, online and mobile sales seem to be growing.

Causes behind the trend

Slowing down mall traffic, caused by either consumers’ change in shopping habits or a general decline in purchasing power of consumers as a result of a slower growth than expected in salaries of employees or a feeling of shrinking wealth for wealthy people, has added increasing pressure, across retail industry, on price. In addition, relatively low costs of online retail and thus increasing number of online retailers intense this price competition.

Compared with mall-based retail stores, it seems easier for TV platform and online platform maintain traffic by lowering price.

Consumers’ time spent on TV and cost of TV programming may play a role in this sector. 

Increasing consumers’ demand driven by macro-economy/purchasing power or the increasing marketing spending stimulated by money saved from the tax act of 2017 or reduced competition due to massive closure of stores and thus possibility to raise price may be playing the role in rebounding sales in 2018.

Industry Future

While the whole demand for merchandise products should be strong and keeping increasing, TV sale platform is supposed to face increasing difficulties to maintain and compete for traffic with digital sales platform.

We will probably see continuingly weak in sales of companies in this sector.

General Financial Performance of Companies In the Sector

It seems that, based on the typical company data, the demand, from TV shopping platform, for products of those companies in this sector in the past several years has been weak as indicated by the continuingly declining net sales (down 3% annually between 2015 and 2017). The decrease has been a combined result of decreased price (average 5% annual decrease in 2017 and 2016) and slightly improved shipped units (average 1% annual growth in 2017 and 2016). However, in 2018 we see that companies can already raise products price (4%) without negative impacts on sales units (only down 1% compared with 3% prior year). And things have been continuously improved in the recent quarter as we see the improved sales units.

Sales seem to be shifting away from traditional jewelry products to lower price products to capture advantage in price competitions probably as a result of increasing price pressure from retail industry. The promotion in price and shipping costs, as a response to declining sales, hurts companies’ profitability. In addition, the deleveraging of expenses as a result of declining sales caused much bigger problem in terms of cash inflow. However, as a reaction to the pressure on price, companies in this sector seem to be choosing to shift product mix to higher margin products.

The typical companies’ operating margin went down to about 3-4% in 2017. Most of companies’ cash flow thus significantly decreased during the same period. Margin was improved slightly in 2018 as sales rebound accompanying with rising price.

The typical average enterprise price/EBI ratio is about 49 with enterprise price/sales ratio of 0.23.

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