South Korean department stores look to VIPs as sales slide

South Korean department stores have launched an all-out effort to secure VIP customers who spend more than ordinary customers.

Department stores have suffered fallout from the surge in popularity of online shopping malls for years, but sales have come under further pressure with the coronavirus outbreak.

Sales at Lotte Department Store from March 1 to 22 decreased by 37.8 percent compared to the same period last year.

At the height of the pandemic, and under the burden of its economic consequences, the top priority for South Korean department stores is to secure VIP customers.

While VIP customers at the Galleria Department Store account for only 10 percent of all customers, their consumption amounts to 60 percent of sales.

According to Shinsegae Department Store, the number of VIP visits last month was 2.5 times that of regular customers.

Even when the number of visits by regular customers dropped by half after the Covid-19 outbreak, the number of VIP customers dropped by only about 20 percent.

Managing loyal VIP customers and securing more big players in the future is a matter directly related to a store’s survival.

This is why Lotte Department Store made changes to its VIP system. Under the old scheme, customers had to spend 20 million won (US$16,400) per year to qualify for the lowest level VIP program, as part of what was a four-level system.

However, Lotte recently added another lower-level program to expand the scope of its VIP offerings.

Meanwhile, Galleria Department Store, unveiled the largest VIP lounge in South Korea on the 12th floor of its newly opened Gwanggyo branch in Suwon, south of Seoul.

VIP lounges in South Korean department stores have typically been places for customers who spend tens of millions of won a year. However, at the Gwanggyo branch, customers who spend 5 million won per year can enjoy the VIP lounge.

“The fact that VIP thresholds have been lowered is indicative of a sales strategy to secure loyal customers by providing better services to more customers,” said a source in the department store industry.