Polarized Consumption Boosts Department Store Sales... VIP Criteria Raised
Lotte Renames and Simplifies Grades... P·C Integrated
Shinsegae and Hyundai Also Reduced Authority and Changed Criteria Last Year
As consumption polarization deepens, ultra-luxury spending at department stores is actually increasing despite the economic downturn. The department store industry is raising VIP criteria and effectively reducing their privileges due to the increase in VIP customers, while also striving to create differentiated benefits to retain high-spending customers.
According to the distribution industry on the 4th, Lotte Department Store revamped its VIP customer system from MVG to AvenueL in 2023, simplifying the tiers. Existing MVG AvenueL (A) customers, who are in the top 1% by purchase amount, were changed to AvenueL Black, and Renis (L) customers with annual purchases over 100 million KRW were changed to AvenueL Emerald. MVG Prestige (P) and Crown (C) customers were merged into AvenueL Purple (annual purchase amount between 40 million and 60 million KRW), and MVG Ace (A) customers were changed to AvenueL Orange (annual purchase amount 18 million KRW). VIP Plus and VIP customers were consolidated into AvenueL Green.
With the simplification of tiers, some customers experienced reduced conveniences such as valet parking at department stores. AvenueL Purple customers who spent over 60 million KRW saw the valet parking location at the main store change from the 1st floor of the AvenueL building to the 1st floor of the main building starting this month. At the Jamsil branch, valet parking services, which were previously available on the 1st floors of both the main and AvenueL buildings, were moved to the basement levels 1 and 2. From this year, the system of aggregating sales by family units was also abolished.
A Lotte Department Store official explained, "This revamp (rebranding) was made to allow customers to intuitively recognize the VIP system through tier simplification. Although the tiers were simplified, we aimed to maintain benefit differentiation through sub-tier segmentation and provide upgraded services such as differentiated services tailored to customer targets."
Earlier, Hyundai Department Store raised the VIP selection criteria last year. The minimum annual purchase amounts for Jasmine Black and Jasmine Blue were changed to 120 million KRW and 80 million KRW, respectively. The criteria for Jasmine and Sage are 55 million KRW and 30 million KRW, respectively. The Club YP and Green, targeting the MZ generation (Millennials + Generation Z), remain unchanged.
Shinsegae Department Store also changed its VIP payment criteria last year, applying 100% credit for Shinsegae affiliated cards or cash payments, but only recognizing 50% of Shinsegae points accumulation when paying with gift certificates or other company cards. The continuous issuance of free drink coupons was also discontinued, citing improvements in the Members Bar, a beverage space available to customers in the Red tier and above who have annual purchases over 4 million KRW.
The department store industry views these changes as inevitable adjustments due to the increase in VIP customers following the so-called "revenge consumption" during the COVID-19 period, as high-end product consumption has not significantly changed and ultra-luxury spending has increased with expanded purchasing power. However, the industry said it will continue to refine the system and add new benefits to prevent the loss of high-spending customers who greatly impact department store sales.
An industry insider said, "Despite concerns over a severe economic downturn this year, consumption polarization is intensifying, and department store sales are expected to increase. As sales volume grows, the system is being revised so that those who spend more money enjoy more differentiated VIP benefits."
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