Department stores turn to VIPs to navigate economic slowdown

YPHAUS at The Hyundai Seoul is reserved for members of Club YP, a trendy VIP club run by Hyundai Department Store. Courtesy of Hyundai Department Store

Department stores in Korea are zeroing in on marketing efforts aimed at VIP shoppers as part of their strategy to navigate the current economic downturn by securing customers who consistently demand luxury goods, regardless of economic conditions.

The country’s largest department store chains — Lotte, Shinsegae and Hyundai — are increasingly catering to VIPs, as those shoppers’ contributions to their sales have increased steadily over the past five years.

According to industry officials, Lotte Department Store saw its VIP sales jump to 45 percent last year from 35 percent in 2020. Shinsegae Department Store saw the figure rise to 45 percent from 31 percent, while Hyundai Department Store saw an increase to 43 percent from 38 percent during the same period.

VIPs are defined differently by each company. Lotte refers to those who spent 10 million won ($7,200) or more each year as VIPs and categorize them into six different classes. Shinsegae VIPs include the top 999 spenders of the year and those who spent 5 million won or more each year, divided into seven different classes. Hyundai VIPs include those who spent 10 million won or more each year and are categorized into six different groups.

Shinsegae Department Store earlier this year launched new services for its VIPs. It has partnered with Michelin-starred restaurants to offer free desserts at VIP lounges at all stores and allow VIPs to use their Shinsegae reward points at the restaurants.

Models pose with desserts and drinks made by Michelin-starred restaurants in collaboration with Shinsegae Department Store for their VIPs. Courtesy of Shinsegae Department Store

“We plan to introduce a new service for our Black Diamond VIP club later this year. It is a fine dining event in collaboration with Michelin three-star restaurant Mingles and one-star restaurant Y’east,” said a Shinsegae Department Store official, referring to its highest VIP level.

He added, “Last year we launched The Showcase, a new curated e-commerce platform for our VIPs featuring items that were never before seen here. Among the items was Polestar 4 by Swedish premium electric vehicle brand Polestar. We have also been offering free tickets to final games for global sports events and invitations to exhibitions of rare color diamonds. These online offers are what we have newly launched to replace the traditional offline services. They are drawing positive responses.”

Hyundai Department Store raised this year’s eligibility conditions for its top three VIP groups — Jasmine, Jasmine Blue and Jasmine Black — to “more delicately cater to its VIPs whose needs became more diverse and personalized,” according to the company. Minimum spending for each group has increased by 10 million won to 30 million won.

Since 2023, The Shilla Seoul has thrown an annual private party for 400 selective VIPs featuring music performances by celebrities. It regularly sent air purifying plants to VIPs and hosted reserved lessons in arts and gastronomy under a program called The Highest Class. Club YP, a trendy VIP lounge reserved for those under 45 years old who spend a minimum of 30 million won per year, has been available for younger VIPs since 2021.

“Keeping VIPs has become an essential element for department stores. They show consistent spending power even amid this ongoing downhill consumption trend and soaring market prices,” a Hyundai Department Store official said.