The Consumer Report of Park Dong-hui, the secret weapon of the new world through Coronado

There are only five department stores (based on a single store) with annual sales of over 2 trillion won in the world. Shinsegae Gangnam branch is one of them. At the end of 2019, he joined the ‘2 trillion won club’. As department stores in France (Gallery Lafayette) and UK (Harers) were hit by the new coronavirus infection (Corona 19), the status of the Shinsegae Gangnam branch is estimated to have risen to the ranks of the global’Top 3’this year.

As important as the external growth, the symbolism of the new world is firmly established. There is an anecdote showing this. A blogger, who was quite influential on social media, left a review after buying an expensive vacuum cleaner. “It’s really expensive, but if you use it, it’s a new world! It’s not just Shinsegae, it’s the same as the Shinsegae main store (Gangnam branch).” Shinsegae is recognized as a symbol of’luxury (luxury)’ beyond department stores.

VIP marketing strategy is the foundation for Shinsegae’s achievement

What made this achievement possible in the new world? It can be evaluated that Shinsegae’s unique VIP marketing strategy was effective if one factor was taken as a premise to take the risk of simplification. Shinsegae introduced a marketing technique to segment VIPs by newly establishing a’red’ rating for the first time in the industry in 2017. We focused on candidates who could become VIPs in the future.

There are two reasons to note this process. Shinsegae derived a new marketing strategy from the analysis of the vast amount of data left by customers. While most companies emphasize digital transformation (transformation), it is very rare to make it happen. This is what experts call’digital self-deception’. The new world has escaped this trap.

It is also important to combine the first principle of offline distribution,’Occupy the customer’s time’ with VIP marketing. Shinsegae believed in the power of space. I understood better than anyone that the space as a department store (百貨店), that is, a big box store, which means selling everything in the world, is no longer valid. Instead, Shinsegae focused on making the space armed with’luxury’ match the lives of shoppers as much as possible. Thanks to the widened VIP rating, the young VIP candidates who entered the’Shinsegae’s Secret Door’ fell into the charm of Shinsegae, as if looking for a golden fruit beyond the bush. Shinsegae’s sophistication shined even more as the 2030 generations who lead the trend continued, and this benefited the existing VIPs as well. The effect of virtuous cycle began to appear.

To see how Shinsegae’s new concept of VIP marketing came out, we need to go back to the end of 2016. At that time, Shinsegae worked hard over the years to complete the so-called’Five Projects’. The highlight was the renewal extension of the main store, Gangnam branch. Jeong Yoo-kyung’s ambitious work was unveiled in February of that year. In March, Busan Centum City Branch B opened. From August to December, Shinsegae opened three stores one after another: Hanam, Gimhae, and Daegu.

The expansion of scale in the distribution industry is an inevitable fate. This is because the so-called purchase input can be increased only when there are many stores. This is a matter that directly hits the department store’s margin. In particular, it was necessary to create economies of scale in order to increase the bargaining power with luxury brands that resemble department stores. Compared to Lotte, which has 35 department stores nationwide, there were only eight Shinsegae stores before completing the five major projects.

However, the business conditions surrounding Shinsegae at the time were close to the worst. The retail (retail) industry was a disruption itself. In particular, department stores were hit hard. Sears, a representative mid- to low-end department store chain in the United States with 125 years of tradition, reduced 381 stores (including K-Mart) in 2017 and eventually went bankrupt in 2018. In 2017 alone, as many as 8053 retail stores were withdrawn from the United States. In the UK, in 2016, BHS, a mid- to low-end department store chain with 88 years of history, went bankrupt (in Hwang Ji-young’s 『The Future of Retail』). The department store seemed to be about to end.

The situation in Korea was better than overseas, but it was stagnant. In 2017, domestic department store sales were 29.3 trillion won, down 2% from the previous year. The advent of the younger generation, who consume even luxury goods online, has clouded the future of department stores. In order to practically complete the’Five Projects’, it was necessary to have customers come to new stores in Shinsegae.

‘Secret Weapon’ for VIP Marketing

The Sales Strategy Office, which oversees Shinsegae’s marketing, turned to data to find ways to increase customers. They had a’secret weapon’. Shinsegae began recruiting data science majors in 2015. They are masters and doctors who majored in big data analysis at famous universities at home and abroad, including KAIST. They were assigned to the sales strategy office under the title of assistant manager and manager. It was my first attempt since its inception.

Shinsegae’s’marketers’ wanted to understand the characteristics of visitors. Online shopping would have had endless data on search and payment, but offline data analysis had many limitations. After contemplating what is the most important thing in offline shopping, Shinsegae paid attention to’customer’s time’. They analyzed how often they visit Shinsegae, where they go, and how long they stay after one visit.

As marketers established the framework, data experts brought in data to analyze dwell time. A Shinsegae official said, “As soon as I saw the result, my eyes opened wide.” Diversity came into my eyes, such as those who come to Shinsegae often like a home, and customers who do not come often but scream loudly when they come. Unfortunately, most of these were 2030 generations. It is also called the so-called millennial (a generation born in the 1980s to early 2000s).

“Don’t judge your wallet by how you dress”

Around 2017, marketers in Shinsegae were detecting changes in consumption of luxury goods such as luxury goods to some extent. It was often seen that young men and women in their twenties purchase shoes worth millions of won at a lump sum. These words circulated among the luxury store employees. “Don’t judge your wallet by your dress and face”

The results of the data analyzed by the Sales Strategy Office supported the characteristics of the millennials that have been seen by the public eye. Shinsegae sought a way to bring them into the’world of VIP’, and came to the conclusion that it would expand the VIP rating from the previous 5 to 6 levels.

Unlike other grades, the new’Red’ grade has more subdivided conditions. ① Annual purchase amount of 4 million won or more (at the same time, 24 or more purchase days per year), ② quarterly purchase amount of 2 million or more (one or more purchase days), and ③ Quarterly purchase amount of 1 million or more won (6 purchase days or more).

The biggest difference is that, while the calculation of grades 1-5 is based on the annual purchase amount (‘black’, which is grade 5, is 8 million won or more per year), the selection cycle for’red’ is shortened on a quarterly basis.

If you reach the’Red’ level, you can use the member’s bar in all Shinsegae stores and receive a 3-hour free parking service. There are also discounts of up to 7% on top products in the fashion and general goods genre, and discounts at Shinsegae Academy. Shinsegae has introduced a new cultural class as a benefit, such as baking, leather crafts, sneakers customization, and meditation breathing techniques aimed at the tastes of young VIP customers.

New world with’millennials’

‘Emerging VIPs’ were enthusiastic about such treatment, which seems nothing special. It is not clear whether Shinsegae marketers intended it, but millennials accepted the segmented VIP stage as if it were a game. To maintain their rank or step up, they generously opened their wallets.

While existing VIPs aim for their own closed community and are reluctant to expose their lives, young VIPs showed the opposite behavior. A Shinsegae official said, “Members Bar presents Shinsegae’s unique coffee to VIPs every day, and it periodically changes items such as cups to reflect their youthful sensations.” We don’t hesitate to share.” The’flex culture’ of the MZ generation is giving the effect of word-of-mouth marketing to Shinsegae as a bonus.

Shinsegae’s VIP strategy attracts millennials and is paying off. Sales of 2030 generations among Shinsegae customers last year increased 7.7% from the same period last year. Among VIP customers, the proportion of customers in their 20s and 30s is about 30%.

Gangnam Store 1F,’Luxury Brand’ Showroom

In order to attract millennials, Shinsegae is also putting considerable effort into space innovation. Even the same product has a different value depending on where it is sold. ‘The Stage’ on the first floor of the Gangnam branch is representative. Roger Vivier, Chanel, Dior, Burberry, Cartier, Prada and others have opened’pop-up stores’ here. Shinsegae organized this space as a’showroom’ of famous brands at home and abroad, not as a seller.

A’luxury space’ was created in the middle of the first floor of a department store with the most floating population, so that anyone can easily browse without entering the store, lowering the psychological threshold. Through space innovation, brands can have access to potential customers without additional rent, and department stores are gaining the image of leading the trend.

VIP marketing area expansion

With the success of the VIP class segmentation strategy, Shinsegae is expanding the area of ​​VIP marketing. Based on sales data by genre last year, it even introduced VIPs in the food and life sectors. Even if the absolute purchase amount is not large, the strategy is to increase loyalty by selecting customers who mainly consume a specific genre as VIPs, giving them special treatment.

VIP marketing was also introduced in premium outlets. As a result of analyzing data on Yeoju Premium Outlet members in 2018, the proportion of sales of excellent customers reached 20%. That year, Shinsegae Simon introduced exclusive services for VIPs, such as a dedicated lounge and parking zone.

In October last year, the VIP service was expanded to the Busan branch. By creating a separate concierge room in the lounge, the industry’s first concierge service was launched, allowing customers to remotely purchase luxury brands at Yeoju stores.

■ Points for marketers

The novel coronavirus infection (Corona 19) is changing the topography of the retail industry from its roots. The boundaries between online and offline are disappearing. Experts predict that only places that can fully implement’omni channels’ that integrate reality, virtual and on/off will be the final winners.

For retailers who are rooted in offline distribution such as department stores, Corona 19 is a trial and challenge that they have never experienced. The change in the corporate environment brought about by Corona 19 is a homework that must be solved not only for the retail industry, but also for marketers of all companies.

The question is simple. What are the things that will not change after Corona 19, and what are the things that have no choice but to go back to before Corona 19? Online shopping that delivers to your doorstep the next morning with one click will add that tax.

Conversely, the experience of shopping, especially the experience of being treated and treated by someone, is likely to be the core of the retail industry that will be restored after Corona 19. Outback Steakhouse’s’Knee Serving’ is the same principle that attracts more attention in the Corona era.

In this regard, Shinsegae’s differentiated VIP marketing will serve as a rudder that enables department stores to cross the corona wave. It is an era in which only companies that can occupy the customer’s time can survive.

Reporter Park Donghui [email protected]