What: Major Korean retailers revise loyalty programs with increased spending requirements and reduced benefits, sparking debate about customer retention strategies.

Why it is important: The changes reflect broader industry challenges in balancing exclusive customer benefits with sustainable business practices, while risking customer relationships in an increasingly competitive market.

Korean department stores are implementing significant changes to their VIP programs, with major retailers raising qualification thresholds while reducing benefits. Hyundai Department Store has decreased its luxury mileage brand coverage from 80 to 12 brands and reduced complementary services like café privileges. Shinsegae has established new VIP tiers, raising the diamond rating from 60 million to 70 million won and introducing a "Black Diamond" tier at 120 million won. Lotte Department Store has similarly restructured its system, reducing VIP tiers from 7 to 5 while increasing spending requirements. These changes have sparked customer dissatisfaction and led to the emergence of unofficial performance trading practices, where customers attempt to maintain VIP status through alternative means.

IADS Notes: The changes in Korean department store VIP programs reflect broader industry transformations. While August 2024 data shows department stores enhancing VIP experiences for high-spending customers, December 2024 research reveals growing challenges in meeting evolving customer expectations for loyalty programs. This tension is driving new approaches, as demonstrated by Hyundai's September 2024 partnership with Hankyu to enhance cross-border VIP benefits. The strategy aligns with August 2024 findings showing how Japanese and Korean department stores are transforming their customer engagement approaches. However, January 2025 data indicating increasing market polarisation in Korea suggests these program changes may further intensify the divide between customer segments. These developments show how retailers are struggling to balance exclusive benefits with customer satisfaction in an increasingly competitive market.

It is increasingly difficult to be identified as a VIC in Korean department stores