From competing on low prices to competing on services, can e-commerce platforms break through the situation by relying on paid memberships?
The end of the year is approaching, and it's time to make a new year's consumption plan.
For Yaoyao, renewing memberships on various e-commerce platforms is an important expense. As a 30+-year-old working mother, facing the numerous and complicated membership products in the market and the increasingly intense membership benefits, her renewal criteria have become more demanding this time. "Now there are memberships on every platform. It's not realistic or necessary to buy them all. Only those that can provide tangible added value, services that address pain points, and help save money, time, and effort in consumption, I may consider continuing to pay for."
In 2024, a significant feature of the e-commerce industry is that platforms have shifted from "competing on low prices" to "competing on services".
If the first half of the mobile Internet era saw the primary task of e-commerce as attracting new users, then after the second half began, under the widespread consumer stratification and depleted traffic dividends, user retention has become an urgent matter.
To gather the most valuable users of a platform, the paid membership system is undoubtedly an effective means. Driven by the "sunk cost", the purchasing behavior of paid users is more likely to be accumulated on the platform, bringing a significant increase in the repurchase rate and the average customer transaction value, thereby driving the platform to achieve long-term and stable profits. Then, in the context of the continuous enhancement of membership benefits by various e-commerce platforms, what kind of membership is a high-quality membership in the eyes of consumers? What is the value of membership to the platform?
The "Good Members" in Consumers' Eyes
As a senior online shopping user, Yaoyao has developed her own "value system" when facing a wide variety of e-commerce membership products.
She believes that a good membership service should make users truly feel the sincerity of the platform in terms of value feedback and enhance their recognition of membership rights. This kind of rights must have real use value, which can effectively improve the use experience and quality of life. Yaoyao said: "The quality of a membership is not simply judged by its name. A membership that fits one's consumption concept and meets one's needs is a truly good membership."
With many tasks to handle in life and work, Yaoyao, who has multiple roles, is already overwhelmed. Therefore, in shopping, she attaches great importance to efficiency. "Now the rules of big promotions are becoming more and more complicated. You need to constantly compare prices, reach the full discount threshold by combining purchases, and prepay and wait for delivery. I simply don't have that much time to plan such consumption. This year's Double Eleven, I wanted to buy a down jacket for my child. After finding the desired product, I found that I was still a few dozen yuan short of the full discount threshold. During the process of combining orders to reach the discount threshold, more and more items were added to the shopping cart, which had long deviated from my original intention of buying a down jacket."
Due to taking on more family responsibilities, Yaoyao's consumption concept is typically "buying quality rather than quantity". She is not only highly sensitive to the price of goods, but also has certain pursuits for the quality and brand of goods. At the same time, as a young mother, whether the clothes fit and look good is also one of her shopping needs.
Ultimately, after several rounds of struggles, Yaoyao chose to place an order for a down jacket on Vipshop. "Vipshop offers low discounts, guarantees brand quality, and there is no need to reach the full discount threshold by combining purchases. Members also enjoy unlimited free shipping and on-site return and exchange services, so there is no need to worry about the problem of the clothes not fitting or not looking good after receiving them. It's like an online fitting room."
In addition to Vipshop SVIP, Yaoyao also clicked the "renew" button for JD PLUS members and Taobao 88VIP. Regarding the reasons, Yaoyao frankly said: "Just like the comfortable shopping experience brought by buying clothes on Vipshop, I also rely on JD's guarantee in large home appliances and the convenience of same-day or next-day delivery. Of course, in addition to shopping, I also have the needs of watching dramas and listening to music. Having an 88VIP is equivalent to having multiple memberships such as Mango, NetEase Cloud Music, and Kuakewangpan. In any case, this is an expense that is not at a loss."
Why Do Platforms Need Members?
As a typical imported product, representative enterprises of the paid membership system such as Sam's Club, Amazon, and Costco can achieve partial profits through membership fees. Taking Sam's Club as an example, publicly available data shows that as of November 2024, the number of Sam's Club members in China is 8.6 million. Assuming that each person pays a basic annual fee of 260 yuan, Sam's Club's revenue from membership fees alone in China exceeds 2.2 billion yuan.
However, different from the overseas leading enterprises, looking at the membership products in the domestic e-commerce market, currently, no platform can achieve profits solely through membership fees. So Where exactly does the value of memberships for domestic e-commerce lie?
This requires a brief review of the "development history" of domestic e-commerce.
Since 2010, with the rise of the mobile Internet, the domestic e-commerce market has experienced explosive growth. Established e-commerce platforms represented by Taobao and JD have risen one after another, ushering in a continuous expansion of the number of users and market scale. The sudden emergence of Pinduoduo in 2015 completely changed the competitive landscape of China's e-commerce in the following 10 years, and the emergence of content e-commerce such as Douyin after 2020 has pushed this industry competition to a climax.
At present, the focus of competition among e-commerce platforms has shifted from simply attracting new users at a low cost to in-depth user cultivation based on services. The main reason behind this is that in an increasingly fierce competitive environment, the market traffic is becoming increasingly scarce.
With the total scale approaching the ceiling, the space for new users is constantly shrinking, and the cost of acquiring customers continues to rise. At the same time, the deepening homogeneity of goods and services on various platforms has also made consumers' choices more diverse, and their consumption habits more rational. They no longer blindly pursue low prices by sticking to a certain platform, but pay more attention to the comprehensive services of the platform and the cost performance of products.
In the more brutal Stock Competition 2.0 Era, the fluctuating user scale among platforms makes how to retain these existing high-quality users the main consideration of the platforms. In order to achieve maximum user retention and user stickiness improvement, the strategic core of each platform has shifted from low prices to user experience, and they have all upgraded their services. Among them, the upgrade of membership rights is a very important aspect.
In October 2015, JD launched PLUS membership, becoming the pioneer of the paid membership system of China's e-commerce platforms. In the following 10 years, memberships such as NetEase Yanxuan Membership, Kaola Haigou Black Card Membership, Suning SUPER Membership, Ali 88VIP, and Vipshop Super VIP Membership (SVIP) have been launched one after another, and the localized innovation of paid memberships has developed rapidly.
Taking JD PLUS membership as an example, in addition to the basic rights such as shopping discounts, member-exclusive prices, coupons, and free shipping as an e-commerce platform, in 2018, JD PLUS membership also pioneered the launch of PLUS Life Privileges, covering various rights in eating, drinking, playing, and entertainment, and opening up the online and offline consumption scenarios of members. On this basis, in recent years, JD PLUS has further upgraded category privilege cards and service items in different life scenarios such as home decoration, pets, medicine purchase, and physical examination, and upgraded services such as joint membership, unlimited free shipping, and online return and exchange, to fully meet the more refined consumption needs of members.
Super Users "Supporting" the Platform?
In fact, the essence of paid membership is to screen the "super users" of the platform.
In the long run, any industry follows the Pareto principle. In other words, these few core users with high consumption capacity and high activity account for an absolute dominant proportion of the consumption on the e-commerce platform and are the real performance foundation of the e-commerce platform.
Take Taobao 88VIP as an example. Currently, the number of 88VIP members is 46 million. Compared with the overall active user base of the platform, it is still a "niche" group. However, during the pre-sale period of this year's Double Eleven promotion, the number of 88VIP members who placed orders and made purchases increased by more than 60% year-on-year, the average purchase amount per person increased by more than 30% year-on-year, and the number of visits increased by 50% year-on-year. Even more than half of the sales of top brands on Tmall are contributed by 88VIP.
Another representative example is Vipshop's SVIP. By providing members with rich rights and value-added services, such as an additional 5% discount on discounted items, limited-time discounts on exclusive products, unlimited free shipping for self-operated products, an additional 2% discount at offline stores, various welfare coupon packages, and private sale activities both online and offline, Vipshop continuously strengthens the sense of member value and precipitates a group of highly sticky super users. In the third quarter of this year, the number of active Vipshop SVIP users increased by 11% year-on-year, and about 7.5 million active SVIP users contributed 49% of the online consumption.
Secondly, by screening out paid members through consumer stratification and providing them with more targeted high-quality services and rights, this can greatly enhance the user stickiness and loyalty of these users, establish long-term and stable GMV growth and recurring income, and ultimately build a two-way mutually beneficial relationship between the platform and super users. At the same time, under this positive cycle system, the core users with extremely high stickiness can naturally attract more high-quality merchants to settle in, which is also more conducive to the creation of a sustainable ecological environment for the e-commerce platform. Especially in the current stock competition stage, this undoubtedly determines the operational resilience of the platform in an adverse environment and the ceiling of its long-term performance.
Data shows that after ordinary users become JD PLUS members, their annual consumption amount and consumption frequency increase by more than 150% and 120% respectively year-on-year, showing obvious characteristics of high consumption and high activity. At the same time, in the "2024 Paid E-commerce Membership Experience Report" released by Yicai Research Institute this year, 88VIP members, as the group with the highest loyalty in the industry, have a renewal rate of up to 83%. According to official data from Ali, thanks to this part of core users with high consumption, high activity, and high loyalty, in this year's Double Eleven promotion, the scale of 88VIP's annual cooperative brands increased by more than 300% year-on-year, becoming a new driving force for the business explosion of Tmall brands.
Indeed, in the second half of the mobile Internet era, the importance of the membership economy is constantly emerging. And how to find members, cultivate members, and retain members may become a good medicine for e-commerce companies to seek continuous growth in this fierce competition.