On August 8, alibaba announced that it would launch the “88VIP” membership program at the annual gala of 88 Members. This time, the “88VIP” membership service covers almost all of Alibaba group’s core businesses, such as Tmall supermarket, Tmall direct sales, xiami Music, Taopiaopiao, Ele. me and other businesses. Buying the membership is equivalent to owning the “one-card” rights. It can be foreseen that the new membership system launched by Ali will have a great impact on the e-commerce industry, no less than the proposal of the new retail concept. So why is paying memberships attractive to e-commerce giants? What changes will happen to China’s e-commerce membership system behind alibaba’s layout?
China’s e-commerce paid membership system is in deep trouble
The development of China’s e-commerce membership system has been in a slow state, which is closely related to the problems existing in the membership system itself.
On the one hand, the value of membership is in direct proportion to the purchasing intention of consumers. In the field of membership, the vast majority of consumers are usually rational enough to purchase members. Iresearch data show that whether the monthly income of 3000 yuan below or more than 20000 yuan of consumers, there will be left and right swing when buying members, some consumers even explicitly said that they would not buy members. When the value of a member is high, consumers will have a strong desire to buy, on the contrary, when the value of a member is low, consumers will swing around and even reluctant to buy.
Time and scope are two key factors that determine the value of membership. Time is the term of membership. At present, the membership system in the market is usually divided into three kinds, monthly system, half-year system and one-year system. Members with the same price may have different terms, and whether there is an equivalent relationship between the purchase amount and the length of membership has become the standard for consumers to measure the value of the membership. The scope is the benefits that members can enjoy. For consumers, becoming a member is to enjoy preferential services, so the preferential intensity of goods naturally becomes one of the criteria to determine the value of membership.
However, the current situation of Chinese e-commerce members is that the preferential treatment is not timely, the preferential products and strength are not as expected, and with the time moving, the whole membership service shows a cyclical decline. The emergence of these problems means that the value of Chinese e-commerce members is generally at a low level, and it is naturally difficult for members with low value to attract consumers. The limitation of audience groups prevents the rapid development of China’s e-commerce membership system.
On the other hand, there is a conflict between paying members and free members. In fact, China’s e-commerce membership system has always been dominated by free members. Such free members have formed a general membership mechanism after a long time of accumulation, which is well known and accepted by consumers. For example, Alibaba’s Naughty Value membership system and JD.com’s Jingxiang Value, both have free members.
For membership systems, the market is only so big, the long-term existence of free members will undoubtedly cause a certain squeeze on paying members. For example, after getting used to the benefits brought by free membership, does the appearance of paying membership mean that the preferential intensity and welfare treatment are worth paying for? Especially for some consumers, can paid members offer benefits different from those of free members? At present, the problem of China’s e-commerce membership system is that although various e-commerce companies offer a wide range of membership benefits, few of them can bring actual benefits to consumers. And there are often overlapping benefits between free members and paid members. Various factors restrict the development of paid membership and hinder the development of China’s e-commerce membership system.
In addition, the frequency of use by consumers and the available scenarios are also factors limiting the development of the industry. On the basis of the continuous upgrading of technology, the quality of goods is gradually improving, but the improvement of product quality delays the purchase frequency of consumers, but also reduces the frequency of members to use. At the same time, the simplicity of the use scenario also greatly reduces the frequency of use by consumers. In the case of fewer times of use, consumers will naturally not be very willing to buy paid members.
Why is the slow growth of paid memberships attracting e-commerce giants
With the gradual expansion of the scale of the retail industry, the problem of paying members has become increasingly prominent. However, the continuous problems lead to the slow growth of the number of paying members in the retail industry, and the development of the industry gradually shows a state of stagnation. Under such circumstances, why do e-commerce giants choose to enter the paid membership market?
First, Chinese consumer attitudes are changing, and the membership-based e-commerce market is coming to life. In the context of consumption upgrading, consumers pay more attention to the quality and service of goods in the process of consumption, which means that the price-sensitive consumer group in the early stage is shrinking. In addition, the diffusion effect brought by the cultivation of paying users by content platforms leads to an increasingly strong awareness of paying consumers on e-commerce platforms. Take e-commerce giant JD.com, for example, whose PULS members have seen a compound monthly growth rate of 26.6 percent in paid members’ sales over the past nine months. This also means that membership is a way to upgrade consumption for the current e-commerce industry, in this trend, e-commerce giants will naturally want a piece of the pie.
Secondly, membership system can improve consumers’ stickiness to the platform, reduce the loss of traffic, and help e-commerce to tap the market potential of stock. With the fading of online traffic dividend, membership-based differentiated services become a powerful magic weapon for e-commerce platforms to obtain traffic and enhance consumer stickiness. According to data from Consumer Intelligence Research Institute, Prime users spend $1,300 on Amazon in a year, while non-Prime users spend $1,000 on Amazon. In terms of consumption frequency and quantity, Amazon Prime users are obviously higher than non-Prime users, and the renewal rate of these users is as high as 90%. The paid membership system can increase the stickiness of this group of high-spending users, which is conducive to the realization of the second “new” platform.
Finally, paid memberships are actually another marketing tool by which the giants can increase their revenues and maximize their profits. For e-commerce platforms, the paid membership business model can maximize the platform’s profit, and the profit of this business model is a sustainable positive cycle. First, membership fees realized through paid membership system can drive the performance of the platform and bring new profit growth point for the platform. In 2017, Costco’s net profit reached us $2.679 billion, and membership fees reached US $2.853 billion. Membership fees have become the main profit source of the enterprise.
Second, the economic income brought by the fan effect. In general, members are the fans of the platform. To buy members of e-commerce platforms means to become fans of the platform. As is known to all, fans are usually highly sticky, and the platform can provide targeted value-added services based on these members, such as cross-business services, and add additional services based on the main business, such as entertainment, food delivery, travel, etc.
In addition, membership hierarchical service management helps the platform to maximize the value release of supply chain resources. The membership-based hierarchical service can not only help the platform to achieve accurate marketing, but also provide different delivery services for members and non-members through accurate data. In the case of limited distribution personnel on the platform, targeted on-time delivery is the embodiment of maximizing the efficiency of the platform supply chain and operation.
With the change of consumption, the economic benefits brought by membership system begin to become a new business model, and the value contribution of paid members to e-commerce is gradually emerging. Based on the expansion of multi-dimensional competition, e-commerce giants began to enter the paid-membership market. In order to seize the opportunity in the market, each giant is committed to build their own membership system, in this situation, a variety of paid membership methods emerge in an endless stream.
E-commerce giants fight for the battlefield, the new retail ecology will become the decisive point
The membership system of JD has three parts: Jingdong member, PIUS beans and Beijing, among them, jingdong as long as it is platform consumers can be obtain by sign in and finish the corresponding task, and jingdong member is set up in Beijing enjoy value, on the basis of service platform covering all members, members and jingdong PIUS is paying members as the core, provide the specified services specifically for paid membership and rights and interests. Among the three parts of the system, the value realized by JD PIUS members is obviously greater.
The so-called JINGdong PIUS membership requires consumers to pay a certain fee or have a exchange code to open. Due to the payment factor, the rights and interests and services enjoyed by the members of this system are relatively high. For example, in addition to the three benefits of price, logistics and service, the member can also enjoy iQiyi VIP and 10 times back to Beijing beans two value-added benefits.
In 2017, alibaba merged two independent members of Tmall and Taobao and launched “88 Member”. In 2018, Alibaba incorporated starbucks star card members through cooperation with Starbucks, and launched “88VIP” on August 8. From the layout of Ali, we can see that ali’s membership system is basically built around the expansion of ecology. Among them, Alibaba’s newly launched “88VIP” requires customers with a naughty score of 1,000 or more to pay 88 yuan to become a member of the platform. Members enjoy basic benefits such as price discounts, and the rights and interests cover platforms such as Ele. me, Youku and Xiami Music.
The two e-commerce giants have different ways of playing membership system and have different advantages. Jingdong’s membership system was established earlier and has a more sound structure. The advantages of Ali’s membership system are mainly reflected in its ecological coverage. Overall, Alibaba seems to be the better of the two membership systems. The main reason is that, based on the current consumption development, the membership competition will eventually return to the new retail ecosystem competition.
The reason why the membership battlefield of e-commerce giants will eventually shift to the new retail ecosystem is mainly because paid membership and new retail are essentially the same. The background of the birth of new retail comes from the fading of Internet traffic dividend. E-commerce giants put forward the idea to prevent themselves from falling into traffic dilemma. After all, the essence of new retail is traffic. Therefore, the primary condition for new retail entry is to realize online and offline integration, which is actually the expansion of traffic acquisition channels behind the integration.
The biggest effect of paid membership system is to increase consumers’ stickiness to the platform, which means that the fundamental purpose of e-commerce to develop paid members is to dig into the stock market, which is the same as new retail, in essence to prevent itself from falling into the flow bottleneck. The interconnectedness in nature makes the two have great compatibility, so the competition of the paid membership market will naturally connect with the new retail.
Beyond the nature of it, the principle of paid membership also requires that the platform go beyond the limitations of retail space in order to maximize the benefits of paying members. The paid membership system has three principles, namely the principle of demand matching, the principle of cost expenditure and benefit return reciprocity, and the principle of full utilization of resources. The realization of these three principles is related to the new retail ecological layout.
First, demand matching. In today’s diversified and comprehensive consumer demand, the integration of new retail formats can obviously meet these needs of members. In terms of cost and benefit, the emergence of new retail promotes the effective upgrading of the supply chain in the e-commerce industry, and the efficient operation of the supply chain can save part of the cost for the platform. Finally make full use of resources, in the new retail ecosystem, members in both offline stores and online platform can enjoy the same service, and platform can be Shared by putting a high value customer resources, through the new retail can assign to internal and external ecological system platform, through comprehensive consumption scenarios, connectivity for the achievement of the scene.
In general, as the value of paid membership system continues to highlight, more and more e-commerce giants will join in the future, and as two giants in the e-commerce industry, Alibaba and JD will inevitably compete in this field. Although Alibaba’s new retail member ecosystem seems to be ahead at the present stage, jingdong’s strength is not small. With a perfect membership structure, jingdong still has the opportunity to overtake in the future. It can be foreseen that with the expansion of the traffic dimension, e-commerce giants led by Alibaba and JINGdong will compete for inventory in the paid membership market. The key to the victory of this war lies in the layout of the new retail ecology.
Article/Liu Kuang public account, ID: Liukuang110