Competition Heats Up in E-commerce Industry After Coupang Raises Membership Fee: Naver, Shinsegae, and Others Launch Discount Events

When Coupang raised his paid membership fee from 4,990 won to 7,890 won per month, Naver won and Shinsegae (004170)Other e-commerce organizations and companies are launching competitive membership discount events. It is described as a strategy aimed at transit passengers leaving Coupang.

According to distribution industry on the 16th, Naver will give paid subscription subscribers a three-month voucher and free shipping service from the previous day to the next month. The monthly fee for Naver ‘Naver Plus’ paid membership is 4,900 won.

Shinsegae Group’s G Market and Auction is holding an event where members can register for 4,900 won, a reduction of about 84% from the current annual fee (30,000 won), according to ‘ Big Smile Day’ which will be held next month. Customers who sign up during this period will receive a free one-year extension to their membership, effectively allowing them to enjoy membership benefits for two years.

SSG.com also offers a 10,000 won discount and free shipping coupon to new customers. For the first month of this month, both new and existing members will benefit from free returns on department store products. Customers who request a return will also receive 3,000 won of SSG cash that can be used as cash.

Curly is holding an event where the first month’s membership fee (1,900 won) will be free if you sign up for a paid membership during ‘Curly Member Week’ which will be held between the 22nd and 28th. AliExpress (Ali) also plans to introduce a ‘VIP membership’ that will provide 2% cashback and coupons.

Graphics = Son Min-kyun

◇ E-commerce industry shaken by the rise of Coupang membership

Starting on the 13th, Coupang raised the monthly fee for its paid membership, ‘Wow Membership’, by 58% from 4,990 won to 7,890 won. New members will be subject to the increased price from the date of the increase, and existing members will be subject to the increased price from the re-registration date in August.

It has been two years and four months since the price was increased by 72% from 2,900 won to 4,990 won in December 2021. At that time, it was determined that there was no customer defect because the number of members increased from 9 million to 14 million in the two years after the price increase. However, as this price increase has increased the burden, many in the industry believe that some Coupang customers will continue to leave.

The reason Coupang raised membership fees despite market concerns was to gain investment potential against the domestic onslaught of Chinese direct shopping platforms such as Ali and Temu. According to WiseApp, the total number of monthly domestic users of the two platforms is estimated to exceed 17 million.

Coupang achieved its first annual surplus last year, but its accumulated losses still amount to 6 trillion won ($4.383 billion). At the same time, Coupang announced that it will invest 15 trillion won in new performance expansion and WoW membership over the next three years to compete against the Chinese platform. The situation is that normalizing the costs of paid membership is a natural process.

Graphics = Son Min-kyun

An official in the e-commerce industry said, “Coupang believes that there are limits to competing with Ali and Temu with ultra-low prices, and it seems to be a strategy to enhance profit by strengthening loyal customers and increasing sales of products with high prices per customer.”

Due to the increase in membership fees, Coupang is expected to immediately receive an increase in profits of approximately 40 billion won per month, or 480 billion won per year. This amount is equivalent to 78% of Coupang’s operating profit (KRW 617.4 billion) last year.

As a result, the stock price of Coupang Inc, which is listed on the New York Stock Exchange, showed an upward trend. On the 15th (local time), Coupang’s stock price closed at $21.65, up 1.88%. Even on the 12th, when the membership fee increase was announced, Coupang’s stock price went up 11.5%.

◇ Coupang membership price increase… It is the choice of loyal customers

However, customer reactions to the ‘58%’ increase rate are mixed. Some point to Coupang passing on the cost of the service to customers, as the increase is only 15 days after the launch of the free delivery service Coupang Eats, a delivery application (app) for paid members .

Complaints were also raised that all service charges are paid equally without any choice. One Coupang user said, “I don’t use Coupang Play or Coupang Eats, but paying more for other services is unreasonable. “

Naver here, Shinsegae (004170)Subscription discount strategies introduced by companies such as , Curly, etc. also encourage Coupang customers to leave. However, the main point is that as these are all temporary events, it remains to be seen whether they will have an impact on ‘customer movements’.

WoW membership benefits claimed by Coupang. / Provided by Coupang

Coupang claims that the cost of subscription is lower compared to existing online video services (OTT) because the subscription fee is set as a package of services. With rocket delivery (3,000 won per item), you can get more than the monthly fee by ordering just three times, so it’s still very cost-effective, and customer churn is expected to be low.

Confidence in the company’s services played a role in the background of this explanation. Coupang explained that as a result of analyzing the purchasing patterns of WoW members, each member sees an average profit of 870,000 won when considering rocket delivery and return fees, as well as Coupang’s OTT food delivery fees Play and Coupang Eats for free. your members. Coupang founder Kim Beom-seok also confirmed in a conference call last February, “We gave $3 billion (about 4 trillion won) worth of rewards to WoW members last year.”

Jeong Yeon-seung, a professor of business administration at Dankook University, said, “Coupang’s price increase is not a strategy based on the general opinion of consumers, but it seems to be a message that recommending Coupang’s future path high or low depending on the customer’s opinion.” Ultimately, the evaluation will be done by the customer,” he said.