In the "low-price" war on Double Eleven, how can the "high-priced" e-commerce membership system be upgraded?

What should the e-commerce membership system, which is currently developing at a loss, focus on marketing? What new upgrades should be made? This article analyzes the current status of the e-commerce membership system and two ways to upgrade it in the future.

The “low-price” war among e-commerce companies will not affect the upgrade of the “high-price” membership system.

The Double Eleven pre-sale war has begun. This year, "low price" has become the keyword used by major platforms in order to compete for the largest user base. On another battlefield, the "high-priced" e-commerce membership system has once again attracted people's attention.

First, on October 11, Taobao 88VIP announced an upgrade and renamed itself as "Life Card", adding "Shopping Card" and "All-purpose Card", focusing on the "new three packages" of e-commerce shopping benefits, including daily red envelopes, return shipping packages, and after-sales guarantee packages. In the early publicity of the "low price" war of Taobao and Tmall Double 11, the large coupons of 88VIP in the "Double 11" and "Double 11" that were created by the meme "Double 11 with a fragrance" and "Double 11 with a fragrance" were also mentioned many times.

Soon after, live e-commerce players did not lag behind. On October 17, Dongfang Zhenxuan officially launched a membership fee system, "Zhenxuan Membership", with an annual price of 199 yuan , along with three major membership benefits: 18% discount on self-operated products, coupons for non-self-operated products, and limited-time coupon packages for new members; while Simba, a Kuaishou anchor, also joked about the idea of ​​a "100 yuan" membership fee during a live broadcast...

Entering the era of inventory, the e-commerce battle has upgraded from grabbing territory to deepening user cultivation. The membership system has long become a trend that cannot be avoided. After all, the popularity of Sam's Club has subverted the perception of traditional supermarkets. In the current market environment where the "low price trend" is the mainstream, where should the membership system of various e-commerce players go?

1. E-commerce membership system is moving forward despite “loss”

Oriental Selection’s “Selected Members” has pushed the e-commerce membership system to the forefront.

On the afternoon of October 17, the live broadcast room of Oriental Selection's own APP was extremely lively. Yu Minhong personally sang, and popular anchors such as Dong Yuhui, Mingming, and Dun Dun took turns to perform. The number of spectators far exceeded that of the past. This was all to promote their own members.

Before this, no one would have thought that a live streaming MCN agency would open its own e-commerce membership. Although this was before Double Eleven, Oriental Selection’s move was obviously not just for “promotion.”

In fact, as early as January this year, in the earnings call, Dongfang Zhenxuan CEO Sun Dongxu mentioned the establishment of a paid membership system. "The membership function will be realized through a self-built APP, and exclusive functions and services will be tailored for Dongfang Zhenxuan's customers."

The key lies in the strong binding between members and the self-built app. From now on, the self-owned app will no longer be a distribution channel for Oriental Selection, but a real e-commerce base. This means that it will truly move from a channel brand to an online mall. Therefore, when discussing it, the outside world naturally compared it with the famous membership supermarket Sam's Club.

Everyone knows that Oriental Selection carries the hopes of the entire New Oriental village. Its previous actions have also shown that it wants to move from dependence on the platform to independence and explore another form of existence of live streaming e-commerce. At least for now, it thinks that the membership system is an important breakthrough. Whether it can become China's "Online Sam's Club" is not the point. At least, it thinks that the e-commerce membership system has hope.

This "hope" of e-commerce membership system has long been grasped by veteran e-commerce players.

In 2015, JD.com introduced the paid membership system to the domestic e-commerce platform for the first time. Three years later, Taobao 88VIP membership entered the battlefield. In order to respond, JD.com PLUS members began to cooperate with iQiyi across platforms in the same year to enrich membership rights. Subsequently, the two started crazy joint ventures, making membership rights more and more "important".

Up to now, 88VIP co-branded benefits have been bundled with platforms such as Mango TV, Youku Video, NetEase Cloud Music, Tao Piaopiao, Quark, Ele.me, and AutoNavi. The total book value of the co-branded membership annual cards alone is nearly 1,000 yuan, not to mention that Taobao is constantly introducing more appealing redemption platforms to attract new members.

Taobao screenshot

The retail paid membership system is an imported product. Compared with the membership-based supermarkets such as Sam's Club and Costco, which are foreign companies that everyone learns from and refers to, we have our own Chinese characteristics. They mainly "make money" through membership fees, while JD.com and Taobao "spend money" through membership.

Jia Luo, vice president of Alibaba and general manager of Tmall platform operations, once said, "We have been losing a lot of money since the day we launched it." Han Rui, vice president of JD.com Group, bluntly stated that JD.com PLUS membership is "far from making ends meet" in terms of income and expenditure.

But why do these two giants continue to upgrade membership benefits when they are clearly losing money? JD PLUS often offers price cuts and promotions, and even directly offered "unlimited free shipping" upgrade benefits at the end of August this year. If video websites such as iQiyi, Youku, Tencent Video and Mango TV can only make money by relying on paid members, e-commerce platforms are not like that. And knowing that the membership system of e-commerce platforms is not profitable, why did Dongfang Zhenxuan still insist on joining the game?

2. What exactly is membership marketing marketing?

Just because you can’t earn membership fees from paying members doesn’t mean you can’t earn their GMV.

According to Alibaba's previously released financial report data, as of June 30, 2022, there are 25 million 88VIP members, who have created 1.425 trillion yuan in GMV for Alibaba in the past 12 months, with an average consumption of 57,000 yuan per person, and created 18.04% of the platform's GMV with a user ratio of 2.77%. Alibaba Vice President Jia Luo once said that during the 618 and Double 11 periods, the transaction volume of a single 88VIP user was about 4 to 5 times that of an ordinary user.

In addition to strong purchasing power, another important data is that from June 30, 2021 to June 30, 2022, the proportion of 88VIP users who are still actively consuming is as high as 98%. In the context of the platform's cost reduction and efficiency improvement and consumers tightening their wallets, this performance is particularly rare.

Alibaba Financial Report

High-value users with high purchasing power and high loyalty are the most attractive core advantage of the paid membership system. Purchasing power brings GMV, and loyalty brings long-term stable GMV.

The reason why this business model, founded by Costco in the United States in 1976, has achieved great success worldwide is that it has created a positive cycle: growth in membership scale - better quality services and more stable supply chain - attracting more members - continued growth in membership fees and GMV...

In the process of China's e-commerce shifting from extensive growth to refined operations, the introduction of a paid membership system is inevitable. It can help platforms identify who their core users are. They not only lay the foundation for a platform's survival, but also determine the ceiling of the platform's revenue.

Compared with foreign membership-based supermarkets such as Costco and Sam's Club, which are more inclined to "screen" members, domestic e-commerce membership systems are more inclined to "cultivate" members. The former means that you can only consume here if you pay the membership fee, while the latter means that you can only open a paid membership here at a low cost if your consumption reaches the standard.

Taobao and JD have set certain thresholds for paid membership. For the former, users with a Taobao value of 1,000 or more can purchase an 88vip annual card at 88 yuan, otherwise they have to spend 888 yuan; for the latter, users with a Jingxiang value of more than 4,500 can purchase a PLUS membership at 99 yuan, otherwise they have to spend 149.

JD screenshot

The achievement of Taoqi Value and Jingxiang Value must be supported by consumption. On the one hand, it is to filter out pure wool parties. After all, the membership fee itself is a loss-making business. On the other hand, it is more or less guiding.

There are two reasons behind this: one is that China has not yet formed a stable middle-class lifestyle and consumption pattern , as can be seen from the long-term slow development of Sam's Club after entering the country, and there is still room for cultivating users' consumption habits; the other is that mainstream Chinese e-commerce platforms are following a "big and comprehensive" model , and adhere to user stratification and funnel models in user operations. Paid membership needs to be "grown" rather than "designed".

In fact, as long as users do a little calculation, they can know that paid membership is definitely profitable for them, not to mention that domestic e-commerce platforms have lowered the price to less than 100 yuan. In a sense, it is true that the more you spend, the more you save.

Even so, the popularity of domestic e-commerce membership is still very low , with Taobao 88VIP accounting for 2.77% and JD PLUS members accounting for 5.17%. Compared with Amazon Prime members, which account for more than half, there is still a considerable gap. The latter's annual fee is US$119 in its main battlefield, the United States, and 288 yuan in China.

However, relying on the huge population base, according to current official public data, Taobao 88VIP and JD PLUS members also have 25 million and 30 million members respectively. With the increase in member penetration rate, the consumption power growth brought about will be full of imagination. Compared with the growth of ordinary users, this is the real future.

However, the question is, how to carry out “development training” for members through the localized upgrade of the paid membership system?

3. Two Paths to Upgrade E-commerce Membership

Self-operated e-commerce and platform e-commerce will inevitably take two different membership upgrade paths. The former will be an "O2O Sam's Club" with Chinese characteristics, and the latter will move towards a giant one-stop ecological membership.

For self-operated e-commerce, the safest path is to study the operating models of Costco and Sam's Club. The first thing to break through is the product power . A typical example is Oriental Selection, whose target users highly overlap with Sam's Club. Both are aimed at middle-class consumers, and this group of people will naturally compare it with Sam's Club. Compared with Sam's Club, which has 4,000 SKUs of products, Oriental Selection, which has only about 155 SKUs, has a clear gap and no advantages in price and product variety.

To put it another way, this is supported by the huge membership scale accumulated by Sam's Club over many years of global operation. The paid membership system is a typical flywheel effect business model, and the membership scale is the fulcrum that pries the flywheel. Compared with Sam's Club, the advantage of Oriental Selection is that it is not limited by offline physical space. Sam's Club needs to evaluate the scale of potential members when expanding stores in cities, which has a long cycle, high cost and great risk. Oriental Selection has no such constraints at all and has a natural advantage in membership marketing.

The difference is that Sam's Club copies its mature model from one city to another, while Oriental Selection needs to quickly keep up with product selection, purchasing, pricing, and supply chain management as its membership base expands. Its hope of overtaking lies in breakthroughs in digital capabilities, which is also a common weakness of foreign retail companies.

Ultimately, the paid membership system of self-operated e-commerce will inevitably move offline, just as Sam's Club is building an online mall. The O2O paid membership system is the final outcome.

For platform e-commerce, Amazon Prime membership will be a reference, but there are still big differences in essence. China's platform e-commerce paid membership has long moved towards a multi-platform linkage model . It is not limited to the retail format, but covers the entire life scenario including food, clothing, housing, transportation, entertainment, health, finance, home delivery, etc.

In terms of upgrading member rights, platform e-commerce has greater room for maneuver. In addition to product discounts, it can have richer elements of combination innovation. It is also worth mentioning that through the integration of multi-platform data, the user portrait model will become clearer and clearer. On this basis, more refined member stratification can be carried out, not only the stratification of consumption power, but also the stratification of consumption habits and tendencies, so as to maximize the consumption potential of members through targeted marketing and customized services.

In a sense, the membership upgrade of platform e-commerce is also a funnel model, but it is a more complex and multi-dimensional super funnel. Through the refined operation of users' online and offline life consumption in all scenarios, a one-stop super ecological membership system is created.

As the benefits of paying members continue to expand, perhaps in the future everyone will become a paying member of a certain platform.

Author: Mu Yu

Source: Yiyuguancha (ID: yiyuguancha), the telescope and sonar of the pan-entertainment industry.