LG Electronics‘ subscription business gains traction

[Courtesy of LG Electronics Inc.]

South Korean tech giant LG Electronics expects its subscription business to top 1 trillion won ($723.02 million) in sales in 2024 as it expands its subscription service with the launch of new products and active overseas expansion.

LG Electronics announced the release of the ‘LG Dios Objet Collection Stem,’ a new refrigerator with a subscription service, on Sunday. The company also launched a new direct water refrigerator brand, ‘Stem,’ which delivers purified water and ice via a direct water line.

The Stem brand was inspired by how plants deliver water and nutrients through their stems, symbolizing the provision of clean water and ice with the direct water line. It is also more hygienic as there is no need for the cumbersome cleaning of water tanks as opposed to traditional water tank refrigerators. The product will be available either with an outlet or without.

LG Electronics has been strengthening its subscription business by expanding its range of products and providing management and partnership services since starting its water purifier rental business in 2009.

The company has enhanced its services under the ‘UP Appliance 2.0’ initiative in particular since 2023, offering subscription services for 21 appliance categories that include various premium home appliances such as TVs, refrigerators, washing machines, dryers, and air purifiers.

Consumers can choose their desired products and pay a monthly subscription fee for a period ranging from three to six years.

What sets subscription services apart from traditional rentals is that professional care managers regularly visit to clean, inspect performance, and replace consumables such as filters, ensuring thorough product maintenance. LG Electronics has established a specialized team of around 4,000 care managers to support its subscription service, and also offers subscribers various benefits via linked partnership services.

[Graphics by Song Ji-yoon]

Subscription services are rapidly growing in popularity, especially among young customers who need large appliances, as they reduce the initial financial burden and make product maintenance easier.

For LG Electronics, the subscription service is also beneficial in terms of sales and customer management. Unlike one-time purchases, where products are bought once every ten years or so, the subscription model allows the company to stay in touch with customers and understand their needs better.

LG Electronics is also increasing its presence in overseas markets to boost sales. It recently successfully entered the Malaysian market and is planning to expand further into other Asian countries.

As a result of these efforts, the subscription business is becoming a new cash cow for LG Electronics.

According to the company‘s quarterly report, it recorded 345.6 billion won in subscription sales in the first quarter of 2024. This is a 72 percent increase from the 201 billion won recorded during the same period a year ago.

Considering that LG Electronics posted a total of 962.8 billion won in subscription sales in 2023, industry insiders predict that the company is on track to top 1 trillion won in annual sales in 2024.