How Membership Based Commerce cuts out middlemen

When the initial D2C brands burst on the scene starting with Warby Parker, Glossier etc, there was a strong excitement around the whole concept. They raised tremendous amounts of money from the investors on the premise that through a direct model on the internet, they can cut out the middlemen and thus, offer consumers a better product for lower prices.
However, that turned out to be an empty promise. Most of these companies were using either search (Google) or social media (Meta) to acquire consumers, which turned out to be fairly expensive. They realised that even with the normal retail markups of 5x+, they struggled to make profits and hence, many of them had to expand to marketplaces like Amazon and offline retail chains. As soon as they entered these channels, price parity meant that prices had to be in sync in all channels, resulting in higher markups for own website customers also.
In fact, now the website has become just a starting channel which brands use to prove some initial demand and then they use it to raise capital from investors and then expand into other channels.       
We believe that a membership based commerce solves both these problems and is a win-win for all parties. In fact, retailers like Costco have proven that this works in the offline world and we believe that those principles translate well in the online domain also.

A membership club is able to price products without retail markups, which means that the customers are able to get products at prices which are 50-60% off the retail price. Hence, often membership fees can be recouped in one purchase.

On the other hand, with membership fees, the retailer is able to offset its initial customer costs. Membership fees also means that the members (frequent purchasers) actually enjoy price savings, rather than normal retail, where the margins earned from repeat customers is generally used to offset losses on one time customers, thus resulting in no price benefits for repeat customers.    

We at Formulary Maison, which is a membership based club for beauty and wellness products (the first in India), have found that with this approach our customers can save upwards of INR 1,000 -1,500 per product on luxury skincare items. Some of our frequent buyers are on track to save over INR 30,000 annually.