On the morning of May 13 last year, following the news of Chanel's price increase, citizens lined up in front of the luxury goods hall at the Lotte Department Store main branch in Jung-gu, Seoul, hoping to purchase Chanel bags. [Image source=Yonhap News]
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The three major department stores have launched a battle to win over VIP customers. As luxury consumption has surged rapidly since COVID-19, they are fiercely competing behind the scenes to expand their VIP customer base.
Lotte and Hyundai: "Let's Increase VIP Customers"
According to industry sources on the 4th, Lotte Department Store recently granted VIP status at the department store to the highest-tier LVVIP and LVIP members among Lotte Duty Free's VIP customers. This move aims to attract customers who cannot enjoy duty-free shopping due to the halted overseas travel caused by COVID-19 to the department store. A department store official explained, "VIP customers who used to purchase luxury goods overseas now often visit department store luxury brand stores instead of duty-free shops," adding, "We expect synergy effects among affiliates such as using Lotte Points, so we decided to collaborate."
At Lotte Department Store, about 0.75% of the total 8 million customers, approximately 60,000 people, are classified as VIPs, accounting for 5% of total sales. The duty-free store also plans to encourage customers who have stopped visiting duty-free shops to shop at the department store and then visit the duty-free lounge to browse domestic sales products.
The Hyundai Department Store branch, The Hyundai Seoul, which opened in Yeouido, granted Hyundai Department Store VIP status for three months exclusively to VIP customers of competitors such as Lotte Department Store and Shinsegae Department Store. Customers without prior purchase records at Hyundai Department Store can enjoy VIP benefits for three months. Depending on the tier, customers can receive free refreshments and drinks at a dedicated lounge within the department store, valet parking, purchase discounts, and anniversary gifts.
The Hyundai Seoul recorded sales exceeding 2 billion KRW on the single day of its pre-opening on the 24th of last month, which was open to some VIP customers. A Hyundai Department Store official said, "In the department store industry, it is common to offer benefits to VIP customers of other department stores for a certain period when opening a new store," adding, "The Hyundai Seoul also temporarily granted benefits only to customers who inquired about matching."
Shinsegae: "Let's Protect VIP Customers"
Shinsegae Department Store is pursuing a strategy opposite to its competitors. It has raised some of the criteria for selecting VIP customers and decided to recognize only 50% of the spending made with non-affiliated cards (point accumulation) and gift certificates as actual sales. Shinsegae explained that this is to improve the quality of services for VIP members and to prioritize loyal customers who use department store affiliated cards.
Industry insiders interpret that Shinsegae Department Store's strengthening of the VIP system reflects confidence from holding relatively popular luxury brands. There are six department stores in Korea that house the so-called "Big Three" luxury brands?Herm?s, Chanel, and Louis Vuitton?and three of them are Shinsegae stores. It is said that the likelihood of Shinsegae Department Store's main store VVIP customers, who frequently purchase these luxury brands, switching to VIPs of other department stores is low.
A department store official said, "Despite difficulties due to COVID-19 last year, luxury brands somewhat kept the department stores afloat," adding, "This year, as suppressed consumer sentiment recovers and leads to revenge spending, each company is focusing on securing and maintaining many customers with strong purchasing power."
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