EO Intelligence Report -- Retail Paid Membership in China and U.S.
The use of paid membership reveals a shift in the concept of retail business services. At the same time, paid members who have a higher expectation in goods and services will also force companies to evolve.
A paid membership is a state of belonging to an organization after certain payments.
Retail paid membership is more like an access to a vast range of products, services and benefits. To acquire a paid membership in retail stores or supermarkets, all you need is simply to pay membership fees, then you will receive a specific status or qualification within a time period. The state of belonging, however, would only occur when a company meets consumers' expectations (good quality, reasonable price, and recurring cash flow) and provides good shopping experiences.
From a business perspective, the use of paid membership reveals a shift in the concept of retail business services. At the same time, paid members who have a higher expectation in goods and services will also force companies to evolve.
In order to analyze the commercial value of the paid membership system in retail enterprises, EO Intelligence (a research institution of EO company) summarized the current major retail paid membership application scenarios in the following four dimensions.
By summarizing the business logic of application scenarios, EO Intelligence outlines five distinct applications of retail paid membership: a membership-only warehouse supermarket, membership-only e-commerce platforms with single membership service, e-commerce platforms, shopping malls and other physical retailers and e-commerce giant platforms with muli-membership services.
Based on these categories above, EO Intelligence provides information about eight different retail membership companies in China and the United States, and compares their locations, product categories, membership style, strategies and operations to better understand their models and characteristics.
Though different in location selection or even in the form of existence (online or brick-and-mortar store), both companies in China and the U.S. share the same starting point. The mechanism of membership is not only a tool for companies to manage users but also a valuable channel to realize dynamic interaction with their consumers.
Firstly, companies who aim at creating circular value and getting rid of the original profit model of “maximizing profit margin in a single transaction” will pay more attention on how to better serve existing loyal customers, and hoping to add value.
Secondly, paid membership will form a conversion tunnel for user self-feedback, which means that the cost of creating incremental value in the future will be lowered by members’ recommendation.
Thirdly, the data generated by members' continuous consumption helps companies to gain business insights and better understand consumer behavior and serve consumers.
At the end of the day, for any retail companies, the commercial value brought by the paid membership system is not reflected in a short time. Only when the membership reaches a certain level, the dividend will be released continuously.