Across Home Shopping and E-commerce
Top Price Level Among Non-face-to-face Channels
Department Store-style Approach for Select VIPs
Companies Trying to Increase Paid Memberships
Spend 5 Times More Than Regular Members
[Asia Economy Reporter Minyoung Cha] A premium membership system with the highest price level among non-face-to-face channels, including home shopping and e-commerce, is being introduced. Lotte Home Shopping, the first home shopping company to launch a paid membership system, will introduce a VIP membership system with a membership fee of 100,000 KRW next month. The department store-style approach that offers differentiated benefits to a small number of loyal customers stands out.
Lotte Home Shopping announced on the 27th that it will launch the VIP membership "Premium L Club" for the top-tier customers of its paid membership L Club on the 1st of next month. The membership levels are divided into three categories?Black, Blue, and Red?based on the ranking of about 1,500 top customers. A Lotte Home Shopping official explained, "Top customers are selected based on their usage performance, membership invitations are sent first, and customers who agree pay the 100,000 KRW membership fee to join."
The benefits are as remarkable as the entrance fee. As a welcome gift, 130,000 KRW in Lotte Home Shopping points is provided, along with up to 15% discount coupons, free shipping, and L Points accumulation on product purchases, all offered monthly for one year by category. Birthday gifts and additional benefits such as a stay voucher at the 6-star hotel 'Signiel Seoul' and cultural performances are provided according to membership level.
The strengthening of the paid membership system is interpreted as a result of positive evaluations of the existing paid membership service. In fact, Lotte Home Shopping has operated the industry's only paid membership system with an annual fee of 30,000 KRW called "L Club" since 2018. The average annual purchase amount of L Club members is 1.47 million KRW, nearly five times that of regular members (300,000 KRW). A 'Lucky Week' event, allowing customers to try the service for free, is also being temporarily held for one week from the 22nd to the 28th of this month.
Additionally, eBay Korea, which operates Gmarket and Auction, is focusing on expanding the number of members of its paid membership system "Smile Club," which has an annual fee of 30,000 KRW. It has been operating since 2017. Currently, Smile Club has accumulated 2 million customers, accounting for about 6.7% of the total 30 million members. E-commerce companies that have transitioned, such as TMON, Coupang, and WEMAKEPRICE, also operate paid membership systems like "Super Save," "Rocket Wow Club," and "Special Price Club." There is also "Lotte Owners," an integrated membership for seven Lotte Group affiliates. Lotte Owners is conducting free trial events to prevent existing member churn amid the restructuring of the Lotte ON system.
However, among warehouse-type large stores that initially led the paid membership culture in the domestic distribution industry centered on Costco, signs of member churn have been detected. Costco Korea currently operates 16 stores domestically and has continued to grow thanks to the popularity of its private brand (PB) "Cutland Signature" products. The annual fee for the Gold Star card for individual members is currently 38,500 KRW. However, Emart Traders, which differentiates itself by positioning as an open market, has continued to grow annually, shifting the leadership. Lotte Group's Big Market, which has not been able to avoid sluggishness, will also abolish its paid membership system at five stores starting from the 1st of next month.
A home shopping industry official said, "To create a department store-style home shopping membership system targeting top-tier VIPs, a linkage strategy that can create synergy with other channels besides the usual product discount benefits will likely be necessary," adding, "It can also be interpreted as an element of a customer differentiation strategy, such as upgrading the brand image." Professor Yonggu Seo of Sookmyung Women's University’s Department of Business Administration explained, "As retail overall is declining, the fiercely competitive home shopping industry will inevitably have to introduce private (personalized) services," and added, "Instead of typical price competition, adding premium elements to provide customer satisfaction seems to be the common direction."
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