The proportion of VIPs (very important persons) in the domestic department store industry is steadily increasing. Despite the long-term recession followed by an era of high prices and high exchange rates, some department stores report that the share of VIPs in their total sales has exceeded half. This trend appears to result from intense competition among department stores to attract loyal customers with purchasing power.

View of the Shinsegae Department Store in Jung-gu, Seoul. /News1

According to industry sources on the 26th, the share of VIPs in Galleria Department Store's sales last year was recorded at 51%. The share of VIP sales at Galleria Department Store has been rising, increasing from 42% in 2020 to 45% in 2021, 48% in 2022, and 50% in 2023.

The share of VIP sales at Lotte Department Store and Shinsegae Department Store was 45%. Considering that the share of VIPs was 35% and 31% respectively in 2020, the share of VIPs increased last year.

Hyundai Department Store reported a VIP sales ratio of 43% last year, which is also an increase compared to the 38% VIP ratio in 2021.

Given the circumstances, competition in the industry to target high-purchasing VIPs is intensifying. Even amidst an economic downturn, the affluent customer segment continues to purchase luxury and premium products steadily, prompting department stores to ramp up their marketing efforts to attract VIP customers and enhance competitiveness.

Overview of the Hyundai Department Store headquarters. /Courtesy of Hyundai Department Store

A notable example is the elevation of VIP grade criteria. In the case of Lotte Department Store, Avenue L Black is selected internally, Avenue L Emerald requires annual spending of over 100 million won, Purple requires over 50 million won, Orange varies between 20 million to 25 million won depending on the store, and Green requires over 10 million won.

Shinsegae Department Store classifies the top 999 customers by purchasing performance as 'Trinity' grade for separate management. Additionally, Black Diamond requires over 120 million won, Diamond requires over 70 million won, Platinum requires over 50 million won, Gold requires over 30 million won, Emerald requires over 10 million won, and Red requires over 5 million won.

Department stores are also strengthening their differentiated services. Lotte Department Store introduces VIP-exclusive shopping events and cultural center classes as part of Avenue L Only content on its official app.

Shinsegae Department Store has opened a channel called 'The Showcase' on its official app, accessible only to VIP customers, showcasing products and services available exclusively to them. An 'Upper House Lounge' for the highest-tier VIPs, including Trinity and Black Diamond grades, has also been newly established.

Hyundai Department Store hosts private parties for over 400 VIP customers at the Shilla Hotel. In addition, there is a service for regular delivery to VIP customers of air-purifying plants, orchids, and flowers.