Cars, clothes, beer and books delivered to your door
The program, called Genesis Spectrum, enables subscribers to use a variety of Genesis vehicles - including the G70, G80 and G80 Sport - for 1.49 million won ($1,332) per month. Cars can be switched twice a month. It was the first car subscription program released in Korea by a local automaker.
“I thought it was a reasonable price to try out different cars for a month,” Kim said. “And I could simply apply for the service using a mobile app.”
According to Kim, he liked how he had access to cars he couldn’t afford, and often in unique colors that he might not have picked if he was buying a vehicle to keep.
“I would have enjoyed the service even more if it offered a larger pool of cars to choose from,” Kim added.
Subscription services are not just for newspapers and magazines anymore. Flowers, frying pans, artwork and even cars are offered on monthly subscriptions as companies look for ways to secure a steady revenue stream and consumers are attracted to having new products delivered to their doorstep or experiencing a variety of products at a set monthly cost.
It’s hard to keep track of every new subscription service as start-ups and conglomerates rush to release new schemes to survive and consumption trends change rapidly, but they can be grouped under several categories. Curated subscription services, for instance, offer consumers a different selection of goods based on preference and expert advice, while online subscription services are also growing in popularity after the success of video streaming app Netflix.
One of the most recent services introduced in Korea is the car subscription, a type of luxury service targeting customers who want to experience a luxury life that they cannot afford.
Considering cars cost millions of won, it is not easy for most people to simply visit a shop and buy a car. That’s why, up until now, there have been car leasing programs and car sharing programs which let consumers rent out cars by minutes rather than years.
The subscription model, still in its testing stage in the Korean market, differentiates itself by enabling drivers to drive different cars based on a month-on-month contract. Usually the offered cars are high-end vehicles that are expensive to purchase and companies cover all the tax, maintenance and insurance fees for the driver during the subscription period.
The first company to introduce such a model in Korea was connected car start-up Epikar.
It launched a subscription service dubbed “All the Time Mini” in partnership with Mini in November. Subscribers can choose between six Mini cars - 3Door, 5Door, Countryman, Clubman, Convertible and JCW - at a membership fee of 1,799,000 won a year plus additional monthly fees depending on what pool of cars customers want to choose from.
When this company opened up an offline event to introduce the service last year, about 400 people showed interest and signed up for more information, according to Han Bo-suk, CEO of Epikar.
“We can’t unveil the exact number of subscribers yet because we are at the beginning stage, but we get about 10 inquiry calls for the service every day and the market response is positive,” he said in a phone interview with the Korea JoongAng Daily last week.
“If you like cars, you want to ride in a lot of them … but if you rent out a Mini car for two weeks from an existing car sharing platform, that would cost over 1.9 million won,” Han said. “Customers who want to experience new cars without the burden of researching what cars to buy, taxes and insurance programs would be attracted to our subscription model.”
Korea’s largest automaker Hyundai Motor immediately followed and launched its own subscription service in December through the Genesis brand. At the beginning of this year, the carmaker also released a different subscription service called Hyundai Selection, which offers three Hyundai cars - the Sonata sedan, Tucson SUV and Veloster hatchback - as options at a monthly fee of 720,000 won.
The two are both pilot programs running for 10 months and have each limited the number of subscribers to 50. The service did make headlines, but are yet to gain huge popularity because of the limited offerings, especially for the Hyundai Selection, which offers relatively affordable cars compared to Genesis or Mini.
“We are still testing the market to find out the best subscription offerings,” a spokesperson from Hyundai said.
In the United States, where the subscription model was introduced around 2017, the business is led by luxury car brands like Porsche, Cadillac, Mercedes-Benz and BMW. The carmakers are testing subscription service in parts of the United States.
Porsche Passport, available in Atlanta, offers two membership plans “Launch” and “Accelerate” that cost between $2,000 and $3,000 per month. This service offers drivers on-demand access to Porsche cars, including the 911 Carrera, the 718 Boxster and the Cayman S.
None of the cited brands above have plans to launch their own car subscription services in Korea at the moment apart from BMW’s Mini via local player Epikar. However, they are watching the Korean market with interest.
A spokesperson from Cadillac Korea said it is considering subscription services as a long term strategy, but it still needs time to study the market. Cadillac temporarily ended its one-year-old subscription service in December and is due to launch a refined version of the service in the United States in the second quarter.
Another type of subscription model that is already growing in popularity in Korea is curation-based services.
In a curation-based subscription service, a company regularly sends customers a different selection of hand-picked goods. According to a McKinsey report released last year, over half of all e-commerce subscription services globally are curated.
Unlike regular subscriptions where the same range of goods is sent over and over again, a curated subscription service tailors the selection to a customer’s preferences.
Zuly is one of Korea’s newest fashion subscription services launched by start-up Onion Ground last September. For 78,000 won a month, Zuly delivers new outfits to users every two weeks, taking into account their style preferences and body shape. Customers do have to return the outfits, but unlike similar services abroad, Zuly picks up users’ returns right at their doorsteps, reducing customer effort to the bare minimum.
“We began the service after realizing that many busy women need [a service] that can choose outfits, shop, clean and store clothes in their place,” CEO Lee Si-jin told the Korea Joongang Daily.
“Our customer base has been growing about fourfold every month since our official launch in September,” Lee said. “Given that trend, we are optimistic about securing a place in the domestic fashion industry.”
According to Zuly, it has a team of highly-qualified stylists that study customers’ data to recommend them the most appropriate outfit.
“All our in-house fashion experts have over five years of experience as celebrity stylists, fashion designers, visual directors and more,” Lee said.
Many other curation subscription services work with experts in the field to offer customers a quality experience that they can’t easily get elsewhere.
Beer and wine subscriptions - provided by the likes of Veluga Brewery and Purple Dog in Korea - have in-house sommeliers that pair drinks with compatible snacks and even music.
Driven by a demand for professional art expertise, start-up Pinzle launched a monthly artwork subscription service in September 2017. Every month, the company picks out rising stars in the global art scene and sends subscribers poster-sized prints along with magazines depicting their careers. The start-up is advised by an art expert.
Pinzle’s approach has been a hit. It currently has around 700 regular subscribers and sells around 900 to 1,000 pieces of art every month, including individual sales. Last year, it scored a business deal with Hyundai Home Shopping, exposing its subscriptions to a much larger potential customer base through the TV home shopping channel.
“We launched Pinzle given the growing demand for art and received a positive customer response,” said a spokesperson from Hyundai Home Shopping. “We’ve worked with other subscription services before and are open to broadcasting similar services on our channel if there is a good opportunity.”
What you need, when you need
Experiencing a bit of luxury and getting some expert advice is all good, but many customers are simply looking to subscribe to services to save time, energy and money that they would have otherwise spent seeking out goods and services in person.
When it comes to everyday items like razors and sheet masks, automated replenishment subscriptions offer a solution for customers who want to receive regular deliveries of necessities while skipping the hassle of going out to buy them.
Wisely is a razor subscription service and Korea’s answer to the mega-hit U.S.-based Dollar Shave Club that launched last January. For 8,900 won, it sends users four made-in-Germany razor blades every month, guaranteeing them a better shaving experience compared to store-bought alternatives. With the provocative slogan “male customers have been lied to all their lives,” Wisely succeeded in attracting a large fan base through social media and now has over 38,000 likes on its Facebook page.
Amorepacific’s sheet mask delivery service D.Steady is another subscription service that launched in October 2017. The cosmetics giant sends out 5 or 10 quality sheet masks of a customer’s choice with each delivery. Depending on the plan, users can purchase the masks at a 25 to 30 percent discount compared to their original price.
“D.Steady is Korea’s first sheet mask delivery service that started from an idea proposed by one of our employees through our ‘Lean Startup’ in-house venture program,” explained an Amorepacific spokesperson. “According to our customers, they like our service because of the convenient and regular deliveries and the high quality of our masks. Our service is especially popular among women in their 30s.”
Following the lead of Netflix and music apps, subscription services that offer members exclusive access to their vast content libraries are also growing in number.
In October 2017, start-up Millie’s Library launched the first unlimited e-book subscription service in the country, giving users access to all 30,000 online books available on the platform. Its “Reading Book” service - where celebrities introduce international and domestic best sellers in an audiobook format -helped Millie’s Library reach a broad user demographic. Some 15,000 members tuned into actor Lee Byung-hun reading bits of Yuval Harari’s “Sapiens” within the first week after it was released last November.
Ridi Corporation, which launched Korea’s first mobile e-book service in 2009, began its own monthly subscription service Ridi Select last July. The service only selects and provides the best-selling and positively-reviewed books on the market and also offers original serials by famous authors that are exclusively published on the platform.
“Our goal with Ridi Select was to help bring Koreans closer to books,” said Stella Lee, a PR manager at Ridi. “The domestic publication industry has been reporting record low profits for the past few years. We wanted to help people have easier and cost-effective access to books on a digital platform and even offer original content.”
Subscription vs. Purchase
If more and more people turn to subscriptions, does that mean they won’t buy stuff anymore?
Han of Epikar said he believes consumers will never completely drop ownership.
“When car leasing services were first introduced, people asked the same question, but most people still buy cars,” Han said. “I think car subscriptions are a complementary channel for carmakers to expand their sales volume, rather than a complete alternative to their traditional car-selling strategy.”
“After all, cars are still considered an important asset for many consumers.”
Lee from Ridi Select says subscription models don’t necessarily have to compete with traditional services, adding that the two businesses can benefit each other.
“We run popular social media marketing channels where we introduce selected books in an entertaining way,” she said. “Paper book sales from those titles exploded after they were introduced. We learned that if we help raise interest in books in general, sales of e-books and print books can grow together.”
Zuly CEO Lee agreed, adding that she hopes subscription services help users find the best products on the market.
“Despite the rapid growth of the online fashion industry, it has become difficult for many fashion brands to be profitable,” she said. “We began our service to help both consumers and fashion brands focus on the fundamentals of clothing.”
According to Lee, clothes shoppers are currently overwhelmed with the sheer number of products they are exposed to.
“With the rise of the online age, customers are flooded with the number of available goods and are growing tired of finding and making purchases,” Lee added. “It is our goal to help people save time and money.”
Lee Eun-hee, a professor of consumer science at Inha University, said that while younger generations are drawn to experiencing different products at small subscription fees, they must thoroughly compare the price incurred by owning a product and subscribing.
“Subscription usually comes with additional services, for instance, maintenance and regular check-up by experts may be included when you decide to rent out a water purifier,” Lee said. “But consumers must be able to tell if the price they have to pay for the extra benefits is excessive.”
BY KIM JEE-HEE, KIM EUN-JIN [firstname.lastname@example.org]
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