Government and Home Shopping Have Different Agendas on Supporting Small and Medium Enterprises

[Asia Economy Reporter Seungjin Lee] Government ministries and representatives of each home shopping company will gather in one place to help small and medium-sized enterprises (SMEs) struggling due to the novel coronavirus infection (COVID-19). However, disagreements between the government and companies over support measures are expected.

According to the home shopping industry and the Ministry of Science and ICT on the 2nd, a video conference will be held on the afternoon of the 3rd, chaired by Minister Choi Ki-young of the Ministry of Science and ICT, with representatives from seven TV home shopping companies and ten data home shopping companies. This meeting is a follow-up measure to the "COVID-19 related industry-specific support plan" announced by the government on the 1st, aimed at exploring support measures that the home shopping industry can implement for SMEs.

At the meeting, the Ministry of Science and ICT is expected to request a reduction in sales commission rates for SME products. The ministry has continuously encouraged the home shopping industry to lower sales commission rates to protect SMEs, and the COVID-19 situation is likely to strengthen the ministry's voice. According to data released by the ministry last year, the average sales commission rate for SME products on TV home shopping was 30.5%, higher than the overall product average of 29.6%.

Additionally, the recent increase in non-face-to-face consumption due to COVID-19, which has boosted sales for home shopping companies, is also expected to have an impact. For example, Hyundai Home Shopping's sales increased by 14.5% year-on-year last month, and overall, the home shopping industry's sales growth rate is reported to be relatively good.

However, the home shopping industry unanimously responded that lowering sales commission rates is difficult. A home shopping industry official explained, "There are huge fixed costs called transmission fees, so a blanket reduction in sales commission rates is impossible. We might select one or two SMEs in real difficulty to reduce the rate, but that could raise fairness issues."

According to the Korea Communications Commission last year, home shopping transmission fees, which were around 355.1 billion won in 2008, surged about fivefold to 1.6439 trillion won in 2018 due to the rapid growth of IPTV. The big four TV home shopping companies?GS, CJ, Hyundai, and Lotte?paid 1.4 trillion won in transmission fees last year, accounting for about 40% of their sales.

The Ministry of Science and ICT is also likely to request an expansion of the programming ratio for SME products instead of lowering sales commission rates. It is known that GS, CJ, Hyundai, and Lotte currently have a programming ratio of about 60% for SME products. However, the home shopping industry also finds this difficult. Especially for broadcasting, time is limited, so for new products to be sold, existing products must give up their slots.

Regarding this, a TV home shopping company official said, "Customers want different products depending on the time slot, and each company has different contractual relationships. While it is possible to expand SME products on mobile and online platforms, it is not easy on broadcasting."

The home shopping industry is currently exploring various ways to support SMEs. Early payment to partners or support for quarantine costs are being discussed as priorities. A home shopping industry official said, "We empathize with the difficulties of SMEs and are exploring various measures, but concrete plans will be prepared after the meeting."

Meanwhile, the meeting will also include an inspection of call centers. Last month, a group COVID-19 infection occurred at a call center in Guro-gu, Seoul, prompting each home shopping company to implement telecommuting for call center counselors and take other measures. The Ministry of Science and ICT will re-examine the measures related to the operation of home shopping call centers, and home shopping companies will raise issues such as difficulties arising from call center employees working from home.

This content was produced with the assistance of AI translation services.