GS Home Shopping eyes online retailers
(Adds quotes, details, shares)
By Kim Soyoung
SEOUL, April 24 (Reuters) - GS Home Shopping (028150.KQ), South Korea's largest home shopping retailer, is looking to buy online malls to make the fast-growing e-commerce business its top income generator by 2010, its vice president said on Tuesday.
GS Home Shopping, which currently draws 60 percent of its revenue from TV shopping, is betting on the online business, which makes up 30 percent, because 90 percent of households already subscribe to cable TV, suggesting little room for growth.
"I don't expect any fresh momentum for the TV home shopping industry at least in the next two to three years. The market is saturated, and cable viewing rates are dropping due to newly emerging digital broadcasting platforms such as Internet TV," Noh Young-joon told Reuters in an interview.
"By 2010, the Internet business will likely account for more than half of our total revenue. We are reviewing online B-to-C
(business to customer) shopping malls for possible M&A."
GS Home Shopping, which has a third of South Korea's $5 billion cable TV shopping market, expects to earn a 52 billion won ($56.12 million) net profit in 2007, flat from last year's 51.2 billion won, said Noh, also GS chief financial officer.
His profit estimate is in line with a 54 billion won forecast from 17 analysts surveyed by Reuters Estimates.
GS Home Shopping, with a market value of nearly $600 million, offers apparel, shoes, cosmetics, furniture, electronics and food through a 24-hour cable TV home shopping network, mail order and online shopping mall "www.gseshop.co.kr".
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Its business has stalled in recent years on rising commissions to cable operators and a price war with rivals like CJ Home Shopping (035760.KQ), and analysts worry Lotte Shopping's (023530.KS) $487 million acquisition of Woori Home Shopping last year will further intensify competition.
On the other hand, South Korea's $14 billion online retail market is expected to expand 20 percent annually, even as the overall $120 billion retail industry is set to grow less than 5 percent amid rising borrowing costs and concerns about a possible collapse in property prices.
Noh, who often buys health food products and household appliances from GS Home Shopping, believes the firm could also benefit from expansion into China, India and Vietnam, although he doesn't expect returns in the next few years.
"In China, broadcasting regulations are really tough. The market is very immature and has yet to open up further," Noh said.
GS, which set up its Chinese unit in 2005, makes $15 million annual revenue there and is considering entering other countries such as India and Vietnam, he said.
GS Home Shopping, established in 1994 and formerly known as LG Home Shopping, is 30 percent owned by GS Holdings (078930.KS) and 28 percent owned by foreign investors.
Shares in GS Home Shopping moved little this year as of Monday's close, lagging the wider market's .KQ11 14 percent rise. The stock closed down 1.09 percent on Tuesday at 82,000 won, versus a flat Kosdaq.
((Editing by Sei Chong; soyoung.kim@reuters.com; Reuters Messaging: soyoung.kim.reuters.com@reuters.net;+82-2-3704-5643))
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