LG Electronics is experiencing robust growth in its appliance subscription service. (Image courtesy of LG Electronics)
SEOUL, May 17 (Korea Bizwire) – LG Electronics is experiencing robust growth in its appliance subscription service, with projections indicating the company will reach the 1 trillion won sales mark for the first time this year in this burgeoning sector.
In its first-quarter report released on May 16, LG Electronics announced that its appliance subscription business generated 345.6 billion won in revenue.
This figure represents an all-time high for a quarter and a staggering 71.9% increase compared to the same period last year, when sales stood at 201 billion won.
Industry experts widely anticipate that LG Electronics will surpass 1 trillion won in appliance subscription sales this year, solidifying the segment as a core business portfolio.
“We fully integrated our rental and subscription services in the latter half of last year, propelling the business forward,” said an LG Electronics official.
“Through a diverse product lineup and customized services for customers, the appliance subscription model has secured its position as a key business pillar.”
LG Electronics initiated its rental service with water purifiers in 2009 and has since expanded its subscription offerings across various product categories.
In 2018, the company embarked on diversifying its subscription lineup, a strategic move that fueled an impressive 26.9% compound annual growth rate through 2022.
Last year witnessed the addition of major appliances like refrigerators and washing machines to the subscription roster, following the initial focus on smaller home appliances.
In the fourth quarter of 2022, LG Electronics further broadened its subscription horizons to encompass TVs and laptops. Currently, the company offers subscriptions for 21 different products, spanning contract periods of three to six years.
A significant advantage of appliance subscriptions is the lower financial burden compared to outright purchases.
Moreover, LG Electronics provides complimentary after-sales service throughout the subscription period.
The company has even integrated additional household services, such as regular detergent and fresh food deliveries, as well as storage solutions, transcending the traditional rental model by combining product management and domestic services.
This holistic approach has resonated with consumers, with 34.5% of LG Electronics’ Best Shop customers opting for subscriptions in April alone.
Despite the challenges faced by the appliance market due to high prices, unfavorable exchange rates, high interest rates, and delayed demand recovery, LG Electronics has diversified its business approach through the subscription model, driving substantial increases in both revenue and operating profit.
In the first quarter, the company reported record-high revenue of 21 trillion won and operating profit of 1.3 trillion won.
“Moving beyond our traditional hardware-centric product sales model, where revenue and profits were generated at the point of sale, we will continue to innovate by incorporating subscriptions, content, services, and solutions into a circular business model that ensures sustained revenue generation,” remarked an LG Electronics representative.
Ashley Song (ashley@koreabizwire.com)
