What: Department stores are reducing the operation expenses related to VIP management.

Why it is important: In an inflationary context, this might make sense from a P&L point of view but could create issues with customers who will not feel supported anymore and might be tempted to find other ways to spend their money.

South Korean department stores have reduced benefits for top-spending VIP customers as they are becoming too costly.

Lotte has changed for the first time in 20 years its VIP program, reducing the number of classification categories and the number of mid-level VIP customers.

Hyundai has increased its minimum yearly spent amount to claim for VIP benefits from $31,520 to $48.860 and for higher level VIC from $63,800 to $95,700.

Finally, Shinsegae does not give away free drinks to entry-level VIP customers.

This is due to the fact that the number of VIP customers has surged so  much in the past 2 years that supporting their benefits is becoming unsustainable for department stores’ P&L.

South Korean department stores reduce VIP benefits