Subscription services hit 2nd wave as big firms join in

Industry

Published: 20 Jul. 2020, 20:04 Updated: 20 Jul. 2020, 20:15

Subscription services hit 2nd wave as big firms join in

Subscription services, which had been the domain of scrappy start-ups, are attracting the attention of larger, better-established companies, with the Covid-19 pandemic driving many to consider the model.

Almost anything can now be purchased by subscription, including bread, coffee and ice cream. Even ice cubes are available in this way.

The fruit-subscription service started by Shinsegae Department Store's Gangnam branch in May delivers an assortment of seasonal fruits every week for a 180,000 won ($149) minimum monthly fee. [SHINSEGAE DEPARTMENT STORE]

In May, Shinsegae Department Store’s Gangnam branch in southern Seoul, started a fruit subscription service that selects three to five seasonal fruits every week and sends them to customers. The monthly fee is above 180,000 won ($149), not a cheap price, but the service has gained traction, with 85 percent of members renewing their subscriptions.

Lotte Confectionery’s snack subscription service “Monthly Snack” sold out in three hours to 200 people when it started last month. It costs 9,900 won per month and customers are asked to commit to a three-month subscription for 29,700 won. The package will offer snacks at 20 percent discount. Consumers are not aware of what snacks are in the box until the package is delivered to their doorstep.

Lotte Confectionery rolled out "Monthly Snack" in June, a three-month subscription service that offers an assortment of snacks at 20 percent discount. [YONHAP]

Boosted by the snack box’s success, Lotte went on to introduce an ice cream version of the service, the “Monthly Natuur.” The company is also planning to reintroduce the snack box subscription to make it available for more customers.

“We believe subscription services will become a revenue growth engine for our online business,” said a Lotte Confectionery spokesperson.

Amorepacific’s Osulloc offers a similar service, sending tea and tea-related paraphernalia every month. Hyundai Green Food’s Greating brand operates a subscription service that delivers low-sugar and low-calorie meals every day. Bae&Brewing, a traditional liquor company, recently opened an online shopping mall and started a subscription service with a 10 percent discount offer on its products.

Amorepacific's Osulloc sends tea and tea-related products every month to its subscribers of the Da Da Il Sang service. [OSulloc]

Bakers are also jumping on the bandwagon. CJ Foodville’s Tous les Jours recently began a pilot test where nine stores directly run by the company offer bread, coffee and sandwiches on a monthly subscription plan, with 50 to 80 percent discounted prices. Customers can pick products up at the store.

The subscription economy is rapidly growing globally. According to Credit Suisse, the market size for the subscription economy grew from 215 billion dollars in 2000 to 420 billion dollars in 2015. This year, it is projected to reach 530 billion dollars.

Experts agree that this kind of model can create a lot of new opportunities, but they also advise that companies need to be cautious before establishing their own service.

SK Planet, a subsidiary of SK Telecom, shuttered its Project ANNE, a retail fashion subscription service, in 2017 due to low profits after a year and a half. Memebox shut down its subscription business earlier on.

“The second round of the subscription economy has picked up after a hiatus following the cosmetics subscription service boom,” said Song Yong-joo, an analyst at Daishin Securities, adding companies should remain “cautious” on excessive discounts that could potentially push down profitability.

BY BAE JUNG-WON, LEE JEE-YOUNG [lee.jeeyoung1@joongang.co.kr]