September 2005 - Making a Mark in Asia

Opportunities abound for North American DR marketers in Asian countries. So do obstacles and risks-including pirates. But first know that “Asia” is not a DR market. It’s a bunch of them.

By Jack Gordon

The immediate problem with a story about direct response marketing in Asia is that there is no such thing as an “Asian” market that can be described, even in general terms, as a single entity. From the perspective of a North American supplier who would like to transfer a successful DRTV campaign to other parts of the world, Japan has little more in common with China or India or Indonesia than it does with the United States. And if we’re talking about the whole Pacific Rim, the DR markets in Australia and New Zealand don’t bear much resemblance to those in Thailand or South Korea.

George Hung, CEO of GDSpectrum Inc. of Henderson, Nev., and chairman of the Electronic Retailing Association’s Asia Committee, suggests it is helpful to think of the various DR markets west of California as either mature or developing. Under the “mature” heading, he would place Japan, Korea, Singapore, and Taiwan, along with Australia and New Zealand. Japan and Korea, he says, “generally provide the most bang for the buck. The economic scale and maturity of the markets say you’ll sell more there than elsewhere.”

In the “developing” column would go countries including China, India, Indonesia, Thailand, Malaysia, the Philippines, Vietnam and others. In some of those developing markets, especially China’s, the potential obviously is gigantic. But for a multitude of reasons, that potential remains hard to tap.

Even among the developed markets there are radically different DRTV models. Japanese television offers a mix of long- and short-form DR commercials, as well as home shopping programs similar to those on QVC in the United States. But in Korea and Taiwan, Hung and others point out, DRTV essentially means only home shopping networks. One of South Korea’s shopping channels, LG Home Shopping, is the third largest in the world, trailing only QVC and HSN in revenue. The 30-minute infomercial is an extremely rare animal in Korea, and it is altogether extinct in Taiwan, where long-form infomercials are now banned by government decree.

All the nuts and bolts of DR marketing -media buying, payment systems, fulfillment and delivery channels, retail environments, government regulations pertaining to products and advertising claims-vary dramatically among Asian countries. Almost every source interviewed for this article offered the same piece of advice to North American marketers wanting to break into any Asian country: Find a local partner you can trust, and let the partner do most or all of the heavy lifting.

In fact, the best and safest way to begin selling in any Asian country is to act essentially as a wholesaler to an in-country partner or distributor, says Nicole Ali, an international sales manager for Northern Response (Intl.) Ltd. of Toronto, which brokers DR products and infomercials to distributors around the world. Initially, at least, you’ll just sell your products to a trusted distributor and provide your DR commercial. “The distributor will localize the show, translate it, overdub or subtitle it, clear it for airing and import, and handle the media buying, telemarketing and fulfillment,” she says.

This summer, Hung formed an organization, called the PanPacific Alliance, that he says was established to make it easier for North American DR marketers to find trustworthy Asian distributors and to exercise more control over their campaigns than a plain wholesaler does. Launched with distributors in five Asian countries, the alliance eventually will include about 10, Hung says. His company, GDSpectrum, will act as a “sourcing house and middleman.”

Control and trust are major issues in many of the “developing” Asian markets because of the threat of product piracy or counterfeiting. China, because of its manufacturing capabilities, is especially notorious, but Chinese-made knockoffs find their way quickly to other countries whose patent-protection efforts are less than vigorous. If your distributor is untrustworthy, Hung says, “They’ll order a container [of your products], take your commercial, and never order another container-but your product will be all over the stores.”

Even if your distributor is a square dealer, however, that can merely mean that counterfeiting and knockoffs by others become his headaches as well as yours. See the comments of several distributors below.

If there are two universally applicable things to say about DR marketing in Asia as a whole, one is that you’re likely to see a surprising number of DRTV shows in which the item the hosts are selling is an edible fish. The second, which comes from Barb Allen, an international sales manager for Northern Response Intl. Ltd. who specializes in Japan, is a hopeful principle that applies to DR marketing anywhere. “This business is all about a good show selling a unique and innovative product,” she says. “If you have that, you have a good chance of taking the product to another market and being successful. At heart, there is a similarity among consumers all over the world. We all want to be a little thinner, more attractive, and find products that make our lives a little easier.”

Here are snapshot views of the DR picture in eight Pacific Rim countries, provided by veteran players in each market.

Japan is the only Pacific Rim country at present that offers market data for total DR sales, which is more authoritative than an individual distributor’s estimate. According to the Japan Direct Marketing Association (JADMA), the DR market in Japan amounts to $20 billion and is growing at a rate of 10 to 15 percent per year.

Harry Hill is chief operating officer of Oak Lawn Marketing, a Tokyo-based DRTV and retail-branding company that does business as Shop Japan. He says that DRTV and Internet sales channels are very well developed in Japan and that the regulatory climate makes product piracy essentially a non-issue.

Obstacles to North American marketers include high media costs and the fact that “the media landscape is still controlled by an old-boy network, so contacts and past dealings are crucial to gain and maintain media exposure.” Also, Hill says, Japanese consumers still prefer cash transactions, and cash on delivery (COD) is the most popular means of payment. Credit-card purchases are growing, but still account for “less than half” of all sales.

Northern Response’s Ali observes that the prevalence of COD purchases in Japan, Korea and other Asian countries can mean “sticker shock” for suppliers accustomed to offering buyers multiple payment options that let the product sound less expensive. In Japan and elsewhere, she says, advertisements usually state a single price, with shipping inclusive-no two-pays, three-pays, etc.

The next big opportunity expected to develop in Asia (and elsewhere) is mobile DR marketing, in which consumers will buy products directly from their cell phones. If and when that new channel materializes in a significant way, Hill and Allen both say it will happen first in Japan, which has about 85 million cell-phone users. Oak Lawn Marketing already has a website designed for Internet-enabled phones, and “sales are growing monthly,” Hill says.

Allen observes that the two largest mobile phone providers in Japan, NTT Docomo and KDDI, “both have online-shopping capability on their systems…[Japan] no doubt will be setting the trends for mobile commerce now and in the future.”
Hill cautions, however, that even in Japan, mobile DR marketing is best regarded at present as the greatest thing that hasn’t quite happened yet. “To date, the only real revenue opportunities in this area have been in the downloading of ring-tone tunes and information-stuff like news, sports and fortune-telling,” he says. “Actually, fortune-telling has been by far the most profitable.”

Kwang S. Hahn is president and CEO of Hanjo Corp. of Seoul, which buys airtime and handles fulfillment for DRTV products. Hanjo also is in the mail order and catalog business, and supplies products to a home shopping channel in Shanghai, China. Counting television, catalog and Internet sales, Hahn estimates the total DR market in Korea at about $10 billion-half of Japan’s, but far larger than any other Asian country’s. With five home shopping channels going strong in Korea, the TV-sales market is “huge but almost saturated.” Still, the best opportunities for DR products lie in the shopping channels, which dwarf the traditional DRTV market.

While a “strong-impact show with quality and reasonable pricing is always successful” in Korea, Hahn says U.S. DR marketers are often tripped up by the country’s advertising regulations. Among other things, these ban before-and-after comparisons and are very tough on weight-loss claims. His advice: Before trying to jump into the Korean market, “study the regulations on products and media placement.”

Mark Baker is CEO of Sun Capital Ltd. in Australia, whose subsidiary, Icon Marketing, distributes and markets consumer products in Australia and New Zealand via DRTV, Internet and retail channels. Baker estimates the size of Australia’s DRTV market, including the country’s single home shopping channel, at $150 million “and growing strongly.”

While it can be hard to obtain half-hour infomercial time in Australia, Baker says, “there are other avenues to maximize volumes, particularly the four-minute to six-minute ‘advertorial’ format within the morning shows on the free-to-air networks, which have been successful for over 10 years in this market.” His strongest advice to North American DR marketers who want to test the waters in Australia-or anywhere in the Pacific region-is to “plan your product offering well in advance with a local partner that you trust. The last thing you want to do after you have a domestic success in the United States is to have to go back and re-shoot a show from scratch or do clinical trials or other testing from the beginning. Finding out too late about local regulations-which are generally more stringent than in the U.S. for DRTV products-could delay your international launch by months or even years.”

Planning your international offering at the same time you plan your domestic campaign means more cost and effort in the early stages, Baker acknowledges, “but in the end you will keep your costs down and reduce your time to market in Australia and elsewhere.”

Baker’s final tip for U.S. DR marketers eyeing the English-speaking part of the Pacific region: “Do not ignore New Zealand.” The population is much smaller than Australia’s, but Kiwi consumers are “very responsive to DRTV marketing.”

Ivan Yim, executive vice president of marketing and product development for Pacific Media Plc. of Hong Kong, which has DRTV, Internet and retailing operations in mainland China, estimates a current Chinese DR market of $350 million to $400 million.

Don’t be misled by China’s 1.3 billion population, Yim warns. The potential consumer market is more realistically viewed in terms of the roughly 400 million TV households concentrated in provinces around Shanghai, Beijing and Guangzhou. (Other sources point to a “middle class” market of about 120 million people.) Still, that’s a tremendous number of potential buyers. “But entry into the world’s single largest consumer market is not without obstacles,” Yim says. Which is putting it mildly.

Yim confirms the warning issued by most Asia experts about the problem of counterfeit products in China. “Without an unwavering commitment to protect intellectual property rights, the life cycle for any given product [offered on Chinese television] is three to five months before counterfeit items are available,” he says. “Chemical-based products may have a longer shelf life, but tested and proven ‘product concepts’ can also be quickly mimicked, given China’s vast and varied manufacturing capability.”

Obtaining Chinese patent and trademark protection for your products is only the first step, Yim says. A supplier also must be willing to “actively seek legal recourse” for infringements through China’s regulatory bureaucracy. “Patience and political clout carry much mileage in managing relations with government agencies.”

And the relationships that must be managed begin long before you even get the chance to exercise whatever clout you or your Chinese partner/distributor may possess in seeking recourse for piracy of an offering that enjoyed a few months of success. Before you can bring a product to market in the first place, Yim says, you must negotiate a complex, multi-agency maze that covers matters, including “importation, TV censorship approval, government product testing and certification for retail channel distribution.”

The regulatory framework is much simpler in Hong Kong, Yim notes. But Hong Kong’s population is only about 6.5 million, and piracy is an issue there, as well as on the mainland.

International pressure on Chinese regulators may eventually tame the counterfeiters, but for now, if a Chinese pirate can make and sell a knockoff version of your successful product cheaper than you can, chances are he will. That translates into extreme price pressure. And adding to the cost pressure on DRTV products, Yim says, is the fact that “99 percent” of transactions in China are COD. “The credit card in Western markets has removed inhibitions for consumers to try products on a whim,” he says. Not so in China. “Hence, pricing is a very key factor in determining a product’s success.”

The silver lining for DR marketers, Yim says, is that while “China’s retail and brick-and-mortar distribution network continues to be developed,” this is not happening at a pace sufficient to meet consumer demand for “quality products.” That leaves a big opening for products available via direct marketing channels, including DRTV, catalog and the Internet-if the supplier can protect them.

Yusuf Sumartha is business development manager for Banang Trading Company of Jakarta, an importer and distributor of kitchen and tableware products, some represented under its in-house Weston brand.

The Indonesian market for DR is virtually untapped, and “the potential is huge,” Sumartha says. “But successful players will need to devise creative ways for payment and delivery.”

He says that “two or three” companies sell in Indonesia by means of TV infomercials and associated chains of retail shops that offer products “as seen on TV.” He describes the country’s mail-order business as “very limited” and web sales as “very small.” Aspiring mail-order players find it difficult or impossible to buy good mailing lists. “Only credit-card issuers have reliable mail lists, and they are not for sale.”

Payment is a tricky issue, Sumartha says, because only about 5 million of Indonesia’s 228 million people have credit cards, many with maxed-out limits, and the fraud rate is high. Payment is usually COD.

Deliveries throughout the far-flung island nation can be made by Federal Express, DHL or UPS, but these are expensive alternatives. “Local courier may be the way to go, but service levels are lower.” (Indeed, Nicole Ali of Northern Response points out that in several Asian countries, “local courier” can mean a person on a bicycle. This doesn’t necessarily limit the size of items that can be shipped, however. She knows “a guy in the Philippines who delivers big boxes of home-exercise equipment on his motorcycle.”)

Adding to the difficulties, Sumartha says, counterfeit and knockoff products from the factories of China find their way quickly to Indonesia. Despite the potential suggested by a population of 228 million people, he sums up the current DR situation in a sentence: “The market is tough and margins are low.”

Stephen Jarvis is chief operating officer of Positive Response Vision Inc. in Makati City, Manila, a DRTV and telemarketing company that operates a shopping channel called 4UTV. He estimates the size of the Philippines’ DRTV market at about $20 million.

The good news: “To get a product up on-air here is quite simple. All we need is a sample and a Betacam NTSC, as we broadcast in English.”

After that, the news for DR marketers gets worse. For instance, “ingestibles are a problem,” Jarvis says, “as it can take up to two years to get approvals.”

Then there’s piracy: “Tapes are a problem if they become popular. For example, Billy Blanks [exercise tapes]. After we had sold our first 1,000, they were available on the streets for $5 for the set. And as we are very close to China, we’re starting to see knockoffs of whatever we put on TV available on the streets a few months afterward. So we are looking for products with good protection.”

As for the retail market, “something that may be unique to the Philippines is that one company controls most of the retail here,” Jarvis says. “The philosophy is that whatever is on TV must be sold at 50 percent less.”

Dennis Chiu is international sales manager for Body Action Enterprise Co. Ltd. of Taichung, a product supplier and DRTV company-one of what he says are more than 50 Taiwanese DRTV companies that also do business in mainland China.
Television coverage is universal in Taiwan. Chiu says there are 4 million TV households (the World Factbook counts 8.8 million television sets), more than 99 percent of them covered by cable service, with “about 85 channels at the moment.” He also describes Internet shopping as “growing strongly.”

DRTV is a bit tricky. Because of government regulations, “we are not able to buy airtimes for [half-hour] infomercials; only two-minute spots are available [on most channels].” However, Chiu says, Taiwan has seven nationwide home shopping channels that rack up about $1.3 billion a year in sales. There also are a number of local TV shopping channels. “We air five- to 15-minute infomercials on those shopping channels.”

He says that household and fitness products are “great for this market.” Due to stringent advertising regulations, however, “we nearly cannot carry any kind of slimming or health products. It takes too long and is too difficult to get approval.”

Chiu insists that despite its proximity to China, Tawan is a refuge from the counterfeiting problems that plague many Asian markets. “I am here to say that Taiwan’s government is very strict about this issue, and it is as safe as Japan or the [U.S.]. As long as there is patent protection in Taiwan, we never need to worry about [counterfeits]. Everything is clear and on the table. Taiwan is a good market for TV products.”

*Asia accounts for three-fifths of the world’s population totaling approximately 3.73 billion people and counting.
Asian Country Population TV Households Video Format Voltage Hz Capital Currency Unit $1 USD = (July 2005) General Facts
AUSTRALIA 20 million 10 million PAL 240 / 415 50 Sydney Australian Dollars 1.36 6 states: NSW, Queensland, S. Australia,
Tasmania, Victoria, W. Australia
CHINA 1.3 billion 400 million PAL 220 50 Beijing Yuan (Renminbi) 8.28
HONG KONG 7 million 2 million PAL 200 / 346 50 Hong Kong Dollars 7.8 1 of the 4 Asian tigers
INDIA 1.1 billion 63 million PAL 230 /300 /400 DC+50 New Delhi Rupee 43.5
INDONESIA 228 million 13.75 million PAL 127 / 220 50 Jakarta Rupiah 9,862.00
JAPAN 130 million 86.5 million NTSC 100 / 200 50 / 60 Tokyo Yen 113 2nd largest economy in the world; 2nd largest buyer of American products (20% of all imports are American made)
KOREA 1 of the 4 Asian tigers
North: Democratic Republic of Korea 22 million 1.2 million NTSC 110 / 220 60 P’yongyang N. Korean Won 146
South: Republic of Korea 48 million 15.9 million NTSC 100 60 Seoul S. Korean Won 1,054
MALAYSIA 22 million 10.8 million PAL 230 / 400 50 Kuala Lampur Ringgit 3.8
NEW ZEALAND 3.8 million 1.9 million PAL 230 / 400 50 Wellington NZ Dollar 1.5
PAKISTAN 144 million 3.1 million PAL 230 / 400 50 Islamabad Rupee 59.6
PHILIPPINES 82 million 3.7 million NTSC 110 / 220 60 Manila Peso 56.4
SINGAPORE 4.3 million 1.33 million PAL 230 / 440 50 Singapore Singapore Dollar 1.7 1 of the 4 Asian tigers
SRI LANKA 19.4 million 1.53 million PAL 230 / 400 50 Colombo Rupee 100.5
TAIWAN 22 million 8.8 million NTSC 110 /200 /220 60 Taipei Taiwan New Dollar 32 1 of the 4 Asian tigers
THAILAND 62 million 15.19 million PAL 230 / 380 50 Bangkok Baht 42.1
“The above data comes from various sources, including the World Fact Book. Thanks to Nicole Ali, Northern Response (Intl.) Ltd.”

Jack Gordon is editor at large of Electronic Retailer magazine. We would appreciate your feedback. To submit comments, point your browser to

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