Oriental Selection launches paid membership, priced at 199 yuan a year. Is this the right path?

Oriental Selection has officially launched a paid membership system. What will you choose?

After building its own APP, Oriental Selection has taken new actions.

On October 17, Oriental Selection officially launched a paid membership system, priced at 199 yuan per year. Members can enjoy multiple benefits such as 12% off on hundreds of self-operated products, 12 membership coupons per year, and a 66 yuan coupon package membership gift. It is estimated that members can save up to 12,000 yuan a year.

Although membership-based supermarkets such as Sam's Club and Costco have achieved success in China, e-commerce giants such as JD.com and Taobao have also verified the feasibility of the membership system.

However, compared with JD.com and Taobao, the pricing of Oriental Selection is not cheap.

So what is the basis for the high prices of Oriental Selection? What is unique about its membership system? This article will answer your questions one by one.

1. Oriental Selection "Paid Membership" is launched

"The price is a bit expensive." This was the first reaction of an Oriental Selection fan after hearing the price of 199 yuan per year.

It is understood that the annual fees of the two major membership supermarkets, Sam's Club and Costco, are currently priced at 260 yuan and 299 yuan respectively.

In the e-commerce world, Taobao 88VIP membership costs 88 yuan per year, and JD PLUS costs 99 yuan per year. Dongfang Selection is more expensive than both.

And for users, Taobao and JD members can enjoy more additional benefits besides basic shopping.

For example, if you purchase a Taobao 88VIP membership, you will also receive a one-year membership of Youku and NetEase Cloud. If you purchase a JD PLUS membership, you will receive a one-year membership of JD Reading.

If that’s the case, why does Oriental Selection have the confidence to price its app at 199 yuan per year?

In the live broadcast room, the host focused on explaining the difference between Oriental Select paid membership and general paid membership, "Save money without worry, and you can refund if you don't save enough."

Regarding the form of card refund, Oriental Selection explained that if the user does not enjoy a discount of RMB 199 or more within one year after purchasing a membership, Oriental Selection will refund the remaining card fee in cash.

Baiguoyuan did the same thing before. For example, if a member who paid 99 yuan for a year bought 12% off self-operated products within a year, the discount he got was 100 yuan, and he only used a 10 yuan coupon. Then, if he applied for a refund before the membership expired, 89 yuan would be returned to the user's account balance.

If you are not satisfied with the membership after purchasing it, you can return it, and you don’t need to contact customer service, you can do it directly in the APP. This measure greatly reduces the trial and error cost of consumers and has become a major advantage of Oriental Select Membership.

Of course, simply offering “refund if not satisfied” is not enough. I believe that most consumers purchase memberships for the purchase discounts.

Here, we can simply do the math for you.

According to the discount of Dongfangxuan, users can earn back the membership fee of 199 yuan by spending about 1,658 yuan. If users want to save up to 12,000 yuan as advertised, they will have to spend about 100,000 yuan on the Dongfangxuan platform in a year.

In addition, the threshold for using the 12 membership coupons for non-self-operated products in one year is 12 off for purchases over 100 yuan, and the minimum consumption required to use them all within one year is 1,200 yuan.

The limited-time coupon package for membership gift also has a usage threshold. Such preferential design can help Oriental Selection promote user repurchase and improve user stickiness.

2. The purpose behind all these actions is to build private domain assets

Oriental Selection has long planned to launch a paid membership system.

In January this year, Sun Dongxu, CEO of Oriental Selection, stated in an earnings call that paid membership is actually a two-way journey. Customers choose to pay a certain annual fee, and Oriental Selection will provide paying members with more comprehensive and exclusive services, including real discounts and offers on products.

But he also emphasized that this function must be realized through the self-operated App to tailor exclusive functions and services for Oriental’s selected customers.

Why do we need to emphasize "self-operated APP"? This may be related to the "suspension of broadcasting" of Dongfang Zhenxuan on Douyin in July this year.

On July 26, the Douyin live broadcast room "Oriental Selection's own products" issued a suspension notice: due to regulatory requirements, from July 26 to 29, the Oriental Selection's own products store and the Oriental Selection's own products live broadcast room will suspend business for 3 days.

Regarding this "very sudden" punishment, some media speculated that it was because when Oriental Selection was live streaming and explaining the ingredient list, there was a QR code on the packaging, which the camera could not avoid. Douyin judged it as malicious traffic diversion and thus closed the store for rectification.

This unexpected episode reflects the helplessness and difficulties faced by companies when doing e-commerce.

That is, users only belong to the platform, not to the merchants.

In other words, although Oriental Selection has established a matrix of nearly 40 million fans on the Douyin platform, the number of fans of the large-scale Oriental Selection alone is as high as 30.902 million, and the live broadcast turnover in the past 30 days has easily exceeded 100 million.

However, the traffic brought by fans does not really belong to Dongfangxuan, but to the Douyin platform. If one day, the brand and the platform fall out, you will not be able to take this traffic away. In fact, as long as the platform rules keep changing, it is not easy for merchants to control the traffic in their own hands.

Because of this, when the "suspension incident" occurred, Oriental Selection responded quickly and chose to start broadcasting and selling goods on its own platform, which was seen by the outside world as an open declaration of war on Douyin.

Image source: Oriental Selection APP live broadcast room

The launch of paid membership may indicate that Oriental Selection has grown stronger and wants to effectively lock in users through paid membership, break away from its dependence on the Douyin platform, and build its own private assets.

On the other hand, Oriental Selection is willing to become a paid member because it is indeed profitable. Take Sam's Club, the originator of paid supermarket membership, for example, its number of members in China has now exceeded 4.4 million.

Even if we calculate it based on the lowest annual fee (260 yuan/year), Sam's Club's membership income in China is conservatively estimated to be more than 1.1 billion yuan. If Oriental Selection can have 1 million paying members in the future, the annual membership fee income alone will be close to 200 million yuan.

Of course, there are challenges facing Oriental Selection. You should know that Sam's offline SKUs are as high as 5,000, with nearly 800 self-operated products. In contrast, Oriental Selection has only about 150 SKUs, which is a clear gap. It is not easy to replicate Sam's success in the short term.

3. Thoughts on paid membership

At present, whether it is e-commerce or other industries, more and more attention is paid to the operation of members. You will find that most of the companies with a high proportion of member business today have maintained stable growth. For example:

Kidswant: Member business accounts for 98%…

KFC: The number of members exceeds 330 million, contributing 62% of the overall revenue;

Jiangnan Buyi: Membership is the cornerstone of performance. As of June 30, 2022, its membership reached 5.9 million, contributing 70% of revenue;

Huazhu Hotel Group: All Seasons, Hanting and other brands are its brands, with more than 200 million members, contributing more than 75% of revenue...

…

Unlike traditional membership, the purpose of "paid membership" is to better screen and retain high-value users, thereby tapping into the user's lifetime value . This is also the future trend of the "membership system."

The famous 80/20 rule tells us that "80% of the profits of most companies are contributed by 20% of users." Paid members (super users) are exactly this 20%. They account for a small proportion, but they have strong spending power, high loyalty, high repurchase rate, and are willing to share.

Data shows that Amazon Prime members spend twice as much as non-members, and JD Plush members spend four times as much as non-members.

All these data show that super users have much higher spending power than ordinary users. They contribute 80% of sales, but do companies put 80% of their energy and resources on them? I'm afraid most companies don't.

In addition to investing in advertising to acquire new customers, cultivating and screening super users should be a better choice for business growth. These "super users" will also become the most important assets of the company in the future.

Coincidentally, in addition to Oriental Selection, JD.com and Taobao have also recently upgraded their paid membership businesses.

It can be seen that from platforms to brands, everyone is promoting paid membership, and this trend is becoming more and more obvious. When the giants are taking action, it means that this is a new round of opportunities that companies need to pay attention to and follow up.

Author: Yan Tao

WeChat public account: Yan Tao San Shou