Jul 17, 2020|
In-Depth Report: JD PLUS: A Virtual Club That Gives You Privileges
by Ella Kidron
In the last few weeks, rumors have been circulating that Walmart will be launching a paid membership service in the U.S. to rival Amazon Prime. According to a Vox report, the service, Walmart+, will cost $98 per year and covers same-day delivery for grocery and general merchandise, to discounts and early access and deals. This comes as no surprise, as the U.S. is by no means an exception in the global rush online. According to market research firm Rakuten Intelligence, e-commerce spending in the U.S. was up more than 30% from the beginning of March through mid-April, compared with the same period last year. People are spending more time and money online, and buying in larger quantities. Families, who may have been spread out, are spending more time under one roof in quarantines. American and European consumers are accustomed to spending their days in the Amazon ecosystem – whether shopping on Amazon’s e-commerce platform, reading books on their Kindle, or ordering from Prime Pantry.
The same is true of China, where online retail sales of physical goods grew by 3% to reach RMB 1.123 trillion yuan in the first two months of the year – a period during which overall retail sales plunged 20.5% year-on-year. The trend has continued, with both JD.com and Alibaba reaching record-breaking transaction volumes during the past 618 Grand Promotion. What is less well-known, however, is that China has a paid membership ecosystem of its own pioneered by none other than JD.com – JD PLUS.
Designed for “highest quality” users
JD PLUS has been around for nearly five years. It now has over 15 million members – defined as the “highest quality” users on the platform, based on frequency, spending level and other criteria. The business was first introduced in 2015, and officially came online in March 2016. At the time, JD observed a comprehensive consumption upgrade, and a willingness from users to embrace paying for services. The willingness to enjoy better services was becoming stronger. At the same time, the entire e-commerce industry, and perhaps the Internet industry at large, was facing the issue of gradually increasing user acquisition costs. “We wanted to gather the best of JD’s resources together to provide to our highest quality users,” said Chunhui Meng, head of JD PLUS. The subscription fee helped JD PLUS screen for these types of users.
Chunhui Meng, head of JD PLUS, speaks to audience at “JD PLUS Open Class” in January 2020
The per capita spending of JD PLUS members is nine times that of ordinary members. These high quality and high spending members also place seven times the amount of orders, and repurchase rate per capital is double that of ordinary members. After joining the JD PLUS program, the average annual spending, order number and weekly revisit rate increased 96%, 50% and 20% respectively.
Overtime, the JD PLUS ecosystem and strategy have grown, focusing first on benefits within the JD platform, and later expanding to shared benefits across platforms, and finally to cover multiple scenarios, including offline ones. JD PLUS looks at its membership benefits as vertical and horizontal – vertical being benefits on JD’s platform, and horizontal being cross-industry and even multi-scenario benefits.
A year after the launch, JD hosted its first PLUS DAY promotion, a one-day promotion dedicated to providing PLUS members with even more discounts and exclusive benefits. In 2017, ahead of Singles Day (November 11th), JD.com and Sam’s Club offered a discounted bundled membership for Sam’s Club and JD PLUS. This is particularly appropriate, given Sam’s Club introduced China’s very first paid membership program over 20 years ago, and JD PLUS was the first Chinese e-commerce company to offer such a program. According to Alizila, Alibaba has a membership ecosystem as well, 88VIP.
At the time JD’s joint membership with Sam’s Club was announced, JD PLUS was gaining steam and Chinese consumers had started showing an increasing willingness to pay for membership programs. According to an iResearch report from 2017, nearly 50% of a sample of Chinese consumers surveyed indicated that they were willing to pay a 10% price premium for better quality.
Benefits beyond retail
From 2018, JD PLUS began to take a different shape, expanding beyond retail to include several other services – turning its focus to providing a truly cross-industry premium benefits program. In April 2018, PLUS inked a partnership with popular video streaming platform iQiYi. Soon after, in September it hit a milestone of 10 million members, and simultaneously announced a raft of new benefits for members, including coupons or memberships for restaurant meals and takeaway, entertainment services, travel bookings, wealth management products and more. Since then JD PLUS has formed partnerships with popular Q&A platform and online books provider Zhihu (知乎，“do you know?” in Chinese), several famous hotel chains, and more.
Key milestones of JD Plus through 2019
Earlier this year, JD PLUS announced it will develop strategic partnerships with over 200 brands in 2020. In April, when JD.com announced its own mini program platform, Burger King became the first partner in the catering industry to use JD’s mini program to distribute benefits to customers with its JD PLUS Member Center mini program.
Most recently, just ahead of this year’s 618 Grand Promotion, JD PLUS partnered with Tencent’s QQ Music, a leading music service provider serving over 800 million users, to offer a bundled membership. Customers who purchase a membership package via either JD PLUS or QQ Music, will be able to enjoy both JD PLUS and QQ Music VIP benefits. Through the partnership, JD and Tencent expand the reach of their respective services to more Chinese consumers.
Membership programs offer retailers a number of advantages, including increased spending. According to Business Insider, about 40% of Prime members spend more than $200 on Amazon over a 90-day period, compared to 13% of non-Prime customers. Once customers pay an up-front fee to a retailer, they are likely to return and shop more often in order to realize a greater return on their initial payment.
JD PLUS users spend significantly more money on JD than non-plus members, with many users regularly spending RMB 1,000 yuan per month, or well over this amount. Members tend to be young, highly-educated professionals primarily living in first or second-tier cities. According to internal data, as of the end of 2019, JD PLUS’s offline lifestyle benefits had served 7 million families, JD PLUS’ designated customer service provided over 3.49 million hours of customer service support. Over 10,000 high spending users have saved over RMB 10,000 yuan through the plus membership – . Over 64% of PLUS users make purchases for their families. It is one of the reasons PLUS offers larger quantity packages of certain items. For example, last year JD’s C2M program, in which it uses customer feedback and analysis to understand how to provide more suitable products to the market, helped the plus team understand the ideal packaging size for a box of cherries. In just 24 hours, almost 90,000 cases were bought, roughly equivalent to 10 days of sales. PLUS members accounted for more than 97.9% of purchases on the day.
JD PLUS includes 12 major shopping privileges on JD, including monthly free shipping coupons, ability to earn JD beans (京豆) with purchases at an accelerated rate, access to millions of premium goods and an alliance of brands which offer a 5% discount exclusively for JD PLUS users. When it first started, JD PLUS had an exclusive membership celebration, PLUS DAY, annually. To increase benefits for users, however, beginning this year, the 8th of every month is designated as PLUS DAY. For example, exclusive access to purchase Feitian Moutai, the most popular brand of Moutai, the liquor served at state dinners in China, as well as coupon packages that cover entire categories on the platform.
Looking ahead, Meng said: “In the future, we will continue to improve the ecosystem, prioritizing shopping benefits supplemented by cross-industry perks, so that we can provide better service for our members to enhance all areas of life. The loyalty of JD Plus members is second to none, and we are confident in our ability to maintain a leading market position.”
JD PLUS has become not a just a key to the world of e-commerce – a discount program – but a key to life, providing premium services and products no matter where consumers are. With JD’s immense experience and resources in retail and supply chain as well as deep cross-industry partnerships, the possibilities are infinite.