JD PLUS membership exceeds 34 million! Why are all e-commerce platforms offering "paid membership"?

Since JD.com launched PLUS membership, the number of members has been rising steadily. In addition to JD.com, platforms such as Taobao and Suning.com are also stepping up their layout and upgrading paid membership services. Why are e-commerce platforms all doing "paid membership"? The author of this article analyzes this, let's take a look.

In March, JD.com Group released its fourth quarter and full-year results for 2022. Data showed that by the end of the fourth quarter, the number of JD.com PLUS members reached 34 million . This means that one out of every 17 JD.com users is a JD.com PLUS member.

Since JD.com launched PLUS membership in October 2015, the number of members has been rising steadily. In September 2018, the number of members reached 10 million; in October 2020, it exceeded 20 million; at the end of 2021, it exceeded 25 million; in July 2022, it exceeded 30 million, and in just 5 months, it increased by nearly 4 million.

At present, JD.com PLUS membership has become the largest paid membership system in the industry. In addition to JD.com, major platforms such as Taobao 88VIP membership and Suning.com Super membership are stepping up the layout and upgrading of paid membership business.

Why are e-commerce platforms offering "paid membership"? Let's explore the trend behind it.

01 "Paid membership", do it even if it loses money

Although e-commerce platforms are currently promoting paid memberships in full swing, only the platforms themselves know the difficulties behind it.

Take Tmall 88vip and JD plus membership as examples.

Tmall 88vip is priced at 88 yuan (can be purchased with 1,000 Taobao points), and members can enjoy a 5% discount on top of the discount when shopping on direct platforms such as Tmall Supermarket and Tmall Global.

The rights package has bundled Youku Video, NetEase Cloud Music, Tao Piao Piao, Ele.me, AutoNavi Taxi, etc. Even without considering the discount rights of goods, the total book value of the co-branded membership annual card alone has exceeded 600 yuan.

In addition to the joint benefits, from 2018 to 2020, Alibaba also spent money to hold three consecutive 88 Member Festivals, inviting many celebrities to perform, which also cost a lot of money.

The price of JD Plus membership is determined by the user's "JD Enjoyment Value". If the JD Enjoyment Value reaches 4,500 points, one can purchase a one-year JD Plus membership for 99 yuan. If the JD Enjoyment Value is less than 4,500 points, it will cost 149 yuan.

The membership benefits are no less than those of Tmall. Members can enjoy benefits such as a monthly 100 yuan coupon, 10 times the Jingdou return, free returns and exchanges, 5 6 yuan shipping coupons per month, and 1 3 yuan shipping coupon per month.

For example, regarding the 10-fold return of Jingdou, according to the JD App data, each PLUS member can receive Jingdou worth 220 yuan per year. Based on the number of 30 million members, JD will lose about 6 billion yuan in profits each year for this item alone.

JD Plus members have more card types for users to choose from, enriching membership benefits in a co-branded manner. So far, JD's co-branded membership cards have teamed up with 10 partners including Tencent Video, iQiyi, Himalaya, and Bilibili.

If calculated based on the annual fees of 88 yuan and 99 yuan respectively, Taobao 88VIP and JD PLUS bring in 2.2 billion yuan and 2.87 billion yuan in membership fee income for the platforms respectively each year. This figure is obviously not comparable to the amount invested by the platforms.

Jia Luo, vice president of Alibaba and general manager of Tmall platform operations division, once said: 88VIP is a project that cannot make a profit. It has been losing a lot of money since its launch.

Han Rui, vice president of JD Group, admitted frankly: Judging from the income and expenditure of JD PLUS members, they are "far from making enough to cover their expenses."

Since being a paid member is laborious and unprofitable, what are the intentions of e-commerce platforms such as Taobao and JD.com?

02 What is the value of paid membership?

Today's market has shifted from incremental competition to stock competition, and the user growth rate of major e-commerce platforms is relatively slow or even stagnant.

Therefore, platforms have also begun to cultivate user resources, and a single model can no longer meet the differentiated needs of consumers. Some high-end consumers are willing to pay more to enjoy better services.

The tiered services of "paid members" can just meet the needs of this part of users, which prompts e-commerce platforms to pay more attention to the rights and shopping experience of paid members when consuming on the platform.

In general, the value of paid membership on e-commerce platforms is reflected in three aspects:

1. Quickly screen high-value users to reduce costs and increase efficiency

Data shows that paid members usually have stronger spending power. For example, the average annual spending of JD PLUS members is 10 times that of non-PLUS members. After ordinary users become PLUS members, their spending amount and consumption frequency increase by more than 150% and 120% year-on-year respectively within one year.

Therefore, the platform will set certain thresholds for paid membership. For example, 88VIP members need to have a Taobao value of more than 1,000 to purchase for 88 yuan; JD Plus members need to have a Jingxiang value of more than 4,500 to purchase for 99 yuan.

Especially since the cost of acquiring customers on e-commerce platforms is high, if companies can achieve long-term retention of high-spending and high-loyalty users, it will undoubtedly be a cost-cutting and efficiency-enhancing move for companies.

2. Promote user order rate and provide stable cash flow

Many platforms’ paid membership benefits include red envelopes, consumer vouchers, and discount coupons of varying amounts. In order to earn back their “membership fees,” users will consume these “vouchers” by placing orders.

In addition, the most direct benefit that paid members bring to companies is membership fees, which can directly bring stable cash flow to companies. For example, the number of Amazon Prime paid members exceeds 100 million, and the annual membership fee income reaches tens of billions of dollars.

3. Reduce churn rate and attract and retain multi-dimensional users

After users pay, there is a certain sunk cost, and the cost of leaving will increase. In particular, paid members usually stay for up to one year, so the loyalty of paid members is relatively high.

In addition, the platform can reach users in different fields through diversified rights and interests content and attract more users to join.

For example, 88VIP members connect the huge Alibaba ecosystem through bundled rights and interests, and attract traffic to each other. For every 100 new 88VIP users, 38 new Youku users, 32 Ele.me users and 27 Tao Piao Piao users can be added.

In general, it is difficult to see the effect of the platform's establishment of rich paid membership benefits in the short term. But in the long run, attracting high-value users may become a new path in the stock era.

Next, I will summarize the paid membership models and characteristics of major e-commerce platforms. There must be something worth learning for you.

03 Inventory of paid memberships on 8 major e-commerce platforms

As early as 2005, Amazon launched the Prime membership program, and in 2018 the number of members exceeded 100 million.

In China, JD.com was the first to launch PLUS membership in 2015. In the following two years, the membership model began to explode, with NetEase Kaola, Suning.com, NetEase Yanxuan and others entering the market. It was not until August 2018 that Alibaba launched 88VIP membership.

Almost all the platforms we are familiar with have launched their own paid membership programs. Especially in recent years, the "involution" has been serious, and the platforms have frequently upgraded their membership products, with great optimization and adjustments in terms of rights and interests, content, and prices.

Below, I have reviewed the paid membership product information of the current mainstream e-commerce platforms, including: Tmall, JD.com, Douyin, Xiaohongshu, Pinduoduo, NetEase Yanxuan, Suning.com, Vipshop, and Kaola.com.

Combining the above membership characteristics and rights, it is not difficult to find some commonalities and trends. I have summarized 4 points:

1. Three benefits: saving money + service + co-branding

The membership benefits of all platforms are designed around the three pillars of "saving money + service + co-branding" . The core benefit is saving money, the basic benefit is service, and the value-added benefit is co-branding.

1) Save money

We can see that "saving money" is the top priority among all types of benefits. From card opening red envelopes, coupons, membership prices, exclusive brand discounts, etc., all are "real money" benefits.

This also indirectly reflects that no matter how many membership benefits there are, "saving money" is the interest that consumers care about most.

2) Services

User service is actually the most important aspect that reflects the value of membership and is also one of the biggest charms of the membership system. However, the service rights and interests provided by these platforms are still relatively basic, with only "exclusive customer service" barely becoming standard.

But even at this point, the depth of service on different platforms varies. Some are online 24 hours a day, some do not require queuing, and some provide services at fixed times and require advance reservations.

3) Joint

This is a popular way of playing on major platforms and an important factor that consumers are willing to pay for.

From the user's perspective, this is an economic account. If the benefits include joint membership, then there is actually money saved.

From the perspective of merchants, this is not only an effective diversion of traffic between brands and a win-win situation, but also, through the linkage of different merchants, it opens up multiple online and offline consumption scenarios for users and establishes a full-scenario advantage with a closer relationship with users.

2. Bundle the "growth" model to encourage more consumption

An excellent membership model is never just one.

Membership models usually include free membership, paid membership, stored value membership, and growth membership . Merchants will package and combine several models in order to achieve the best effect.

In the design of paid membership on these platforms, many of them are bundled with a "growth" model, which is simply a "consumption points system."

The more you spend, the more points you get, and the more benefits you enjoy. The platform encourages consumers to buy, buy, and buy as much as possible through this positive incentive "step-up" method.

For example, when joining Taobao, Taobao requires a Taobao value greater than 1,000, and you can buy it for 88 yuan. If it is less than 1,000, it will cost 888 yuan, which is 10 times the difference! JD.com is similar. If the Jingxiang value is greater than 4,500, you can buy a PLUS membership for 99 yuan.

For example, NetEase Yanxuan's double points and exclusive redemption, and Suning.com's 10-20 times diamond rebate are all aimed at guiding consumers to buy more and earn more points. For the same purchase, member users enjoy more points than ordinary users, so their consumption motivation is stronger.

3. Benefit distribution is intentional and encourages regular consumption

The platform not only hopes that you buy more, but also hopes that you buy frequently. Because only with a certain consumption frequency can users establish consumption habits and generate stronger stickiness, thus generating trust and goodwill towards the platform brand.

Therefore, the platform is also full of "intentions" in the distribution of membership benefits.

On the one hand, it is frequency control. JD.com, NetEase Yanxuan, Xiaohongshu and Kaola.com all issue fixed coupons on a monthly basis, and also provide free trial products, member day activities, freight reductions, etc. "Monthly" has become a very important cycle, ensuring that users have sufficient and reasonable consumption frequency.

On the other hand, it is to break the whole into parts. Everyone should have experienced this. Although these benefits packages contain coupons and red envelopes worth hundreds of yuan, they are actually a combination of several small coupons.

If you really want to make full use of these coupons, you have to buy more, buy more frequently, and use them up again and again. This is also a common "routine".

4. If the savings are not enough, the price difference can be refunded to provide a safety net for users

Many platform members have the "refund of price difference" service, which has gradually become a trend.

For example, NetEase Yanxuan and Suning.com have both launched a policy of "refund of price difference if no return of principal is made". If the amount of money saved by an annual member during the membership period is less than the card fee, the price difference will be returned to the user's account in the form of a gift card or a no-threshold coupon.

Although it cannot be withdrawn as cash, it can still be used within the platform, which is beneficial to both the platform and consumers.

This "refund of price difference" model is very attractive. It firmly grasps the pain point of "saving money" for consumers, provides a safety net for consumers, and provides the greatest degree of protection, so that users can buy boldly and willfully without worrying about calculations.

At the same time, this approach has effectively narrowed the distance between consumers and the platform, lowered the threshold for building trust, and laid a good psychological foundation for the platform's subsequent membership operations.

As a brand, you can consider these four key points when designing paid membership. Of course, consumers and the market are always changing. Don’t always focus on one good method, but learn to embrace change and constantly explore consumer needs. This is the right answer.

04 Conclusion

Nowadays, the market is moving from "incremental" to "stock". Enterprises should pay more attention to the in-depth management of users and start to cultivate them carefully. "Membership" is one of the effective weapons for user management.

Of course, each company faces different situations. How to truly, screen, and retain high-value users requires a lot of time and energy to explore. All this has just begun, and I believe that the "membership war" between major platforms will intensify.

As the old saying goes: whoever wins the users wins the future. I hope that merchants can truly improve the service level of users in this process and let consumers benefit tangibly.

Author: Yan Tao

Source: WeChat public account: "Yan Tao Sanshou"