[Column] Must Subscribe to Survive... The Survival Competition Behind Paid Memberships

"You pay to survive."

This is the assessment of an industry insider regarding the "paid membership" card that players are eagerly pulling out in the era of fierce competition both online and offline amid the rapidly changing distribution environment. The purpose of paid membership is to offer more services when customers pay to become members. From the customer's perspective, if the services they receive are worth the monthly fee, they are willing to pay. What the distribution channels gain from this is loyal customers. Since the membership must be worth the money, customers tend to visit the channel where they have joined the membership for the same products, creating a lock-in effect.

The first to show results was Coupang. In 2018, during the e-commerce Warring States period, Coupang introduced its paid membership card for survival. Now in its fifth year, Coupang's paid membership (Wow Membership) has surpassed 11 million subscribers. The purchase amount and order frequency per paid member are about twice those of non-members. This service significantly contributed to Coupang's turnaround from a long deficit tunnel to recording profits for three consecutive quarters through the first quarter of this year. At a monthly fee of 4,990 KRW, it offers free Rocket Delivery, 30-day free returns, and even provides experiences beyond shopping such as online video streaming service (OTT) Coupang Play viewing. This synergy has been effective. Coupang is not satisfied with this and is currently working on acquiring additional customers.

This outcome threatens not only online competitors but also traditional offline retail giants. According to Euromonitor, last year’s market share by domestic retailers was 5.1% for Shinsegae·E-Mart, 4.4% for Coupang, and 2.5% for Lotte Shopping, showing little difference among companies. The survival issue also underlies Shinsegae Group’s plan to launch the paid membership "Shinsegae Universe Club" next month. The challenge for offline retailers is to increase content that customers can directly experience to make customers visit no matter what. The idea is to have them shop while they are there experiencing it.

This is the background behind Shin Yong-jin, Vice Chairman of Shinsegae Group, saying, "E-Mart will change from a place where customers go to buy things to a place where they spend time." The essence of Shinsegae’s new paid membership is to offer more benefits if customers have these experiences at Shinsegae Department Store, E-Mart, Shinsegae Duty Free, Starbucks, and e-commerce platforms (SSG.com·Gmarket). Shinsegae previously confirmed through the integrated e-commerce Smile Club that membership customers have about 2.1 times higher average purchase amount and 2.8 times more orders than general customers.

The industry sees the full-scale battle for securing paid members both online and offline as having begun. Behind this lies a survival competition. Ultimately, to lock smart consumers as loyal customers, it is crucial to set a reasonable price that is not burdensome to pay monthly and to offer differentiated experiences that are worth more than the cost. The success or failure of paid membership, which is "paid to survive," depends on this.

This content was produced with the assistance of AI translation services.