Can the "Paid Membership Model" Become a Profitable Model for Convenience Store Development?

The added value of paid membership includes two aspects: paying for rights and paying for uniqueness, which means a dual exploration of member value and experience.

In the latest 2022 China Convenience Store TOP100 list released by the China Chain Store & Franchise Association (CCFA), FamilyMart China (hereinafter referred to as "FamilyMart") ranked in the top ten with 2,666 stores. In addition to tactical adjustments in market scale, "Retail Business Finance" observed that FamilyMart launched a 128 yuan/year premium membership card in February this year, upgrading and renewing its member growth system while shifting its business strategy from "seeking quantity" to "seeking precision." Image: FamilyMart launches new premium cardIn the past two years, the "paid membership model," an old model, has borne new fruit in the domestic retail soil. Companies such as Costco, Sam's Club, Hema, and RT-Mart have accelerated their layout of warehouse-style membership stores by riding the wave of the "membership economy." Online subscription systems, online-offline integrated membership, and ecosystem membership systems have also emerged one after another. As the first paid membership convenience store brand in China, FamilyMart began implementing a membership system as early as 2014, piloted a paid model in Shanghai in 2016, and today has a considerable number of paid members, showing initial success in its exploration of the "paid membership model." In other words, FamilyMart provides a valuable reference for domestic convenience store enterprises to transition to the "paid membership model." Choosing to upgrade the paid membership system in the post-epidemic competitive environment, in the view of Taiwan convenience store expert Wang Xianyu, is a move by FamilyMart to rebuild and deepen consumer stickiness. From point to surface, what is worth thinking about is whether the paid membership model can become a profitable model for domestic convenience store enterprises to reverse the situation of "bending down to pick up coins"? Compared with the free points system, what is the significance of retail enterprises laying out a paid membership system? What value can a paid membership system truly create for consumers?From "sitting on the bench" to "a hot commodity" The "paid membership model" has arrived The membership system originated from the European club system (with exclusivity in venue and services), became a popular commercial promotion form in Europe and America in the 1980s, and after being introduced to China in the 1990s, it was favored by department stores, chain supermarkets, and other enterprises, symbolically establishing a free membership system to attract customers and expand sales. Before the concept of "new retail" was proposed, the membership model in the retail industry remained at an inefficient, loose, and passive level: First, member information was more for storage and recording than for in-depth mining; second, the value of membership was limited to low-price purchases rather than added value; third, member relationships remained at the commercial level, lacking growth incentives and emotional maintenance. With the innovation of digital intelligence technology and the development of omni-channel, multi-format retail markets, consumers' mental space has become more multidimensional, and their demands for member rights have become increasingly diverse. As a result, innovation in marketing techniques and membership systems has become a breakthrough for enterprises to enhance consumer stickiness and activity, tap into long-term user value, and increase profitability. Based on the successful experience of Amazon Prime membership, since 2015, Chinese internet e-commerce platforms have begun exploring localized paid membership, with JD PLUS, Taobao 88VIP, Suning Super, and others launching one after another. In a flash, paid membership became standard for e-commerce companies, and market effectiveness depends on key indicators such as core user repurchase rate, average order value, and purchase frequency. Image: Amazon Prime member benefitsAlthough the application and development of paid membership on e-commerce platforms cater to the needs of consumption stratification and upgrading, the reform of membership systems in traditional retail has been relatively slow. For example, warehouse-style membership stores based on the "paid membership model" sat on the bench for more than 20 years after entering China, until the opening of Costco's first store in Shanghai in August 2019 became a landmark event, prompting retail "veterans" such as Metro, Carrefour, and RT-Mart to target this emerging new format and explosively expand to seek new profit growth points. The "paid membership model" suddenly became a hot commodity, closely related to changes in the retail market environment and consumption habits. In the era of stock competition, retail enterprises must provide more refined services and consumer-centric chain models, and the paid membership model can form a strong binding effect between enterprises and mid-to-high-end quality users, thereby adapting to consumption upgrading and stratification trends. At present, the penetration rate of paid membership is mainly in warehouse-style membership stores, which also means that there is still considerable exploration space for applying paid membership to other retail formats. Image: Convenience stores need to expand quality servicesTake the convenience store industry, for example; there are not many practical implementations of the "paid membership model." "Most convenience store brands still implement a free, no-threshold membership system, with a strategy of 'consumption makes you a member,'" said Wang Xianyu. Activities such as points appreciation and redemption, points as cash, and member-day purchases earning N times points have become common and homogeneous, making it difficult to attract and retain customers. In some cases, the simple membership services of convenience stores are not much different from no membership services, and to truly realize the value of the membership system, users need to pay. FamilyMart's uniqueness lies in the fact that it is a trendsetter rather than a follower of the "paid membership model." In a sense, whether the "paid membership model" can become an effective path for the transformation and development of domestic convenience stores, or a profitable model, can be seen from FamilyMart's practice.Through the "threshold" See the evolution and transformation of the membership economy The core of the membership economy is user-driven, giving consumers a broader, more complete, and more convenient shopping experience. Through FamilyMart's decade-long exploration of the convenience store membership economy, it can be seen that this is a process from commodity transactions to service transactions, and it includes three development stages:First, the exploration period (2013-2015), when FamilyMart launched the Jixiang Card, a free membership card integrating exclusive discounts, accumulated points, points redemption, and stored value, focusing on accumulating original data such as user numbers and needs. Second, the trial period (2016-2022), when FamilyMart launched the Zunxiang Card with an annual fee of 100 yuan, marking FamilyMart's first innovative move to test "paid membership convenience stores" in China. Zunxiang members visit stores more than twice as often as ordinary members. Third, the expansion period (starting in 2023), when FamilyMart launched the "New Zunxiang Card," raising the membership fee to 128 yuan/year based on the original Zunxiang Card, while adding exclusive activities such as 20% off all items, Zunxiang consumption rewards, Zunxiang lottery points, and four exclusive benefits for card opening. The upgraded Zunxiang Card can be seen as an advancement from VIP service to SVIP service, forming a clearer tiered system with the Jixiang Card. Image: FamilyMart's new Zunxiang member benefitsWhy does FamilyMart upgrade its paid membership card? From the enterprise's perspective, it is not difficult to understand: through a more differentiated tiered membership system, it can clearly and accurately understand the demands of different members, thereby providing targeted high-value-added services and rights. Looking at the entire retail industry, the paid membership system is a new profit growth point in the era of user stock, not only creating a stable and predictable revenue source for retailers but also serving as a "threshold" to help retailers and consumers improve the two-way selection mechanism. On the other hand, based on the defined customer base, from selecting suppliers, increasing or decreasing SKUs, developing private brands, to implementing marketing activities, each link can formulate targeted strategies based on relatively accurate member profiles, thereby achieving the "value realization" of paid member rights through high-quality goods and services that exceed expectations. Image: Business logic of the paid membership systemRetail enterprises that want to successfully implement the paid membership system must continuously improve their demand aggregation and analysis capabilities, product operation capabilities, and continuous iteration capabilities. First, the demand aggregation and analysis capability is reflected in the enterprise's understanding of paid members. Taking FamilyMart as an example, the age group of members is mainly young and middle-aged people aged 25-34, with the 35-44 age group being the second largest customer base. Among them, urban white-collar workers have relatively fixed life rhythms and a certain ability to pay, and FamilyMart's Pike Coffee, fresh food, and various snacks and leisure foods can well meet the needs of this group at various times. Image: FamilyMart Pike CoffeeWhen FamilyMart's Pike Coffee was first launched, the "volume" of more than 100 cups per day in a single Shanghai store was closely related to the Zunxiang membership system. At that time, the Zunxiang member "gift packages" were all Pike Coffee, and coffee could create many "cross-selling" benefits for stores. "The average store visit frequency of Zunxiang members is basically double that of ordinary members, and white-collar workers are the main force of the Zunxiang card." Tong Weiguo, Assistant President of FamilyMart China, told "Retail Business Finance," "The Zunxiang card provides consumers with member services with more categories, higher quality, and greater discounts, such as fresh food with high consumption frequency." Based on the depth of understanding of paid members' consumption preferences, FamilyMart can effectively carry out reverse customization and develop private brands, thereby mastering supply chain control in terms of brand, pricing power, quality, and scale, and continuously providing members with products and services that others do not have or are better. Second, the product operation capability of an enterprise is largely linked to the level of product selection. In the past two decades, the traditional "sit-and-wait" procurement thinking model has greatly limited the improvement of enterprise product selection capabilities. FamilyMart's exploration of the paid membership system is essentially demand-oriented, helping members screen products, and building a differentiated competitive barrier under the paid membership model through strong product selection capabilities. Third, the continuous iteration capability is manifested in optimizing resource allocation to reduce supply chain costs and providing members with unexpected value-added services. Through targeted management of the entire chain, the "paid membership system" enables FamilyMart to better control costs such as procurement, inventory management, and marketing, maximize benefits for members, bring "four conveniences" of time, space, service, and products, achieve the "value realization" of paid member rights, and thus win high renewal rates, high average order values, and high turnover rates, opening a virtuous cycle of benefit growth. Image: The "four conveniences" provided by FamilyMartIt is worth mentioning that based on the SQC (Service, Quality, Cleanliness) evaluation system, FamilyMart converts the management and service capabilities of each store into visual data, and through trend changes, identifies and precisely improves store deficiencies, thereby stabilizing service quality and forming a sustainable business model and operating mechanism.****Unlocking the most popular consumer relationship model Physical commerce and the digital economy, traditional retail and new retail, after more than a decade of impact and integration, China's retail industry has gradually established the direction of omni-channel integration, changing the previous consumer mindset of online-offline separation and breaking down barriers between channels. The resulting change is that consumers can freely choose in what scenarios, through which channels, to purchase which products, and obtain goods and services of the same quality online and offline. So, what are the real motivations that make consumers pay for and renew their membership? First, the added value of paid membership includes two aspects: paying for rights and paying for uniqueness, which means a dual exploration of member value and experience. "Buying a membership may seem like spending more money, but with careful calculation, it can still accumulate savings." Qi Jia, a post-90s Shanghai drifter, admitted: "The buy-3-get-5 promotion for American coffee is a lifesaver for office workers." "Retail Business Finance" believes that member-exclusive activities, as a promotional method different from ordinary consumers, can achieve "differential treatment" for member identity, effectively promoting the enthusiasm of paid members to consume and enhancing member activity and stickiness. Second, the "paid membership relationship" established between consumers and retailers is also a manifestation of a trust mechanism. On the one hand, retailers focus on key factors such as good products, good prices, and good services to meet members' needs for "speed-first" instant access, "experience-first" emotional satisfaction, and "hierarchical difference" visible supply. Image: Convenience store fresh foodOn the other hand, consumers, based on their understanding, trust, and personal experience with the retailer, choose to pay a deposit (i.e., membership fee) to the merchant for the promise of "providing high-quality products and unique shopping experiences," which can reduce decision-making costs and uncertainty. Of course, if members feel that the rights they obtain exceed the membership fee, the "paid membership" relationship can become a long-term bond between the enterprise and consumers; otherwise, this relationship is difficult to sustain. The "paid membership model" has already become one of the best exploration directions for future retail. "Retail Business Finance" believes that FamilyMart's exploration of paid membership convenience stores demonstrates that the membership system has evolved from a symbol of relationship and identity to a process of convenience store enterprise management thinking and precise understanding of customer needs, and has also unlocked the most popular consumer relationship model for the convenience store industry. It is undeniable that the development of the paid membership system now faces many growth limitations. Whoever can break through these limitations and tap into more value of the membership system will be the one to win in stock competition.