Should Department Stores Offer a VIP Experience?

When it comes to department stores, just 1% of the highest spenders contribute to around 25% of sales, while the top 20% of spenders are responsible for 80% of the stores' revenue, according to Inside Retail.

As a result, South Korean department stores have been enhancing the VIP shopping experience in recent years by renovating their stores and expanding their concierge services for top-tier customers. One such retailer, the Galleria Department Store, opened up a VIP clubhouse location in late 2019 to tailor to its biggest spenders. Only shoppers who spend at least 40 million won a year have access to the special location and what's inside.

CNBC reported that South Korea is home to the most luxury retail spending in the world per capita, but the U.S. is expected to generate the greatest revenue, totaling $77.3 billion in 2024, according to Statista.

The benefits of having regular VIP shoppers at a department store can be formidable. If VIP consumers enjoy repeat shopping, they will contribute regular revenue and can also bring awareness to other VIPs and consumers in general.

Retail Pro International, a software company, explained that having VIP experiences can build loyalty for luxury retailers. "Customers spending thousands of dollars expect to feel valued," the company stated. "These programs go the extra mile for clients who are not only big spenders but often also influencers."

Moreover, per KED Global, many VIP customers are foreigners. For example, Hyundai Department Store’s Trade Center in South Korea serves over 500 foreign VIP customers who consistently spend more than 10 million won per visit. This contributed to a 205% increase in sales from January to April this year compared to the same period in 2023.

The outlet noted that "to attract foreign regulars beyond duty-free items to department store products, Korean department stores have introduced loyalty programs exclusive for foreigners, including reward points. Hyundai Department Store has more than 30,000 foreigners registered to earn its reward points."

Some luxury department stores even charge an annual membership fee to shop as a VIP. According to PYMNTS, London department store Harrods opened an exclusive club last year in Shanghai called “The Residence." The fee to become a member is 150,000 yuan ($21,000) per year, though it is currently only offering 250 memberships.

Back to the U.S., the official Beverly Hills website has a page dedicated to its shopping destination in California. The site caters to VIPs by providing a page on the website that explains how to shop like a VIP in Beverly Hills, including booking private appointments and accessing private rooms at various luxury stores, along with special perks for those deemed VIPs.

For example, Tiffany & Co. has a third-floor salon, while Louis Vuitton’s Beverly Hills flagship welcomes Very Important Clients (VICs) "into a sitting room and outdoor patio to sip champagne as they shop." High spenders can also access closed-off areas like the Burberry Penthouse and Saint Laurent VIP suite, which grant amazing views. Meanwhile, Neiman Marcus has a special team of stylists and fashion pieces for those who can enter the "Bloom's Room."

Although requirements differ for each particular store, the general consensus has to do with spending plenty while at the store, and some are special-invite only.

In Las Vegas, Hermès opened a 13,000-square-foot boutique last month, "complete with the first VIP salon location for U.S. consumers to have a completely private luxury shopping experience," per FashionNetwork.com. Hermès CEO Robert Chavez said of the VIP area, "We did it because we do have a lot of high rollers and we want to be able to cater to them and pamper them."