Alibaba’s new VIP membership plan to build platform loyalty looks a lot like Amazon Prime

Alibaba Group Holding on Wednesday said it is rolling out a new paid membership package that will give members benefits across its ecosystem of services as it looks to gain market share in digital entertainment and food delivery.

Called “88 VIP”, users pay an annual fee of 888 yuan (US$128.70) to purchase a package that entitles them to a year of benefits, such as access to content on video-streaming platform Youku Tudou, a subscription to Alibaba’s music platform Xiami as well as discounts on its food delivery platform Ele.me and e-commerce sites Taobao Marketplace and Tmall. Existing Alibaba users who have 1,000 points can pay 88 yuan to upgrade to the 88 VIP package.

Alibaba’s new membership package is similar to Amazon Prime in the US, where members get free shipping, discounts and access to streaming video and music. The move comes as Alibaba seeks to gain a larger market share in platforms with Ele.me, and with its digital entertainment offerings, at a time when Chinese users are more inclined to pay for content and services thanks to rising affluence and ease of mobile payments, with apps such as Tencent Holdings’ WeChat Pay and Alibaba-affiliated Alipay.

“Customers always take centre-stage at Alibaba. With the introduction of ‘New Retail’, customers are more engaged both online and offline. The decision to have an exclusive membership tier is not just about rewarding our most active members, it’s also about building an all-around experience our customers can enjoy every day,” said Chris Tung, chief marketing officer of Alibaba.

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The membership package from Alibaba, the dominant e-commerce platform in China with almost 60 per cent market share, according to statistics from eMarketer, will likely appeal to users who shop regularly on the platforms and is designed to encourage customer loyalty or “stickiness”, as users are more likely to consume digital content from Youku and Xiami if membership is included.

Baidu, Alibaba and Tencent are fighting it out in the digital content space, as the number of subscribers who pay for digital content continues to rise in China. All three have spent billions to acquire content and produce original films and TV dramas in a bid to attract users to their platforms.

Tencent Video, the video streaming platform of the Shenzhen internet giant, in February said it reached 62.59 million paid subscriptions. Baidu-backed iQiyi said it reached 60.1 million subscribers in the same month, while Youku said in its year-end report in March that growth in daily average subscribers had jumped 160 per cent from a year ago.

Alibaba is spending big to invest in its recently acquired meal delivery unit Ele.me

The new membership package could also help Ele.me’s battle for dominance in the on-demand delivery space against Tencent-backed Meituan-Dianping. Members of Ele.me’s subscription program get free delivery on all food orders made on the platform, as well as virtual “red packets” that give them discounts on their orders.

Last month, Ele.me said it would spend 3 billion yuan (US$439 million) over the summer months alone to offer subsidies and incentives to its users, as it looks to carve out over 50 per cent market share in food delivery.

Alibaba is the parent company of the South China Morning Post.