The Future of Retail: Embracing the Experience Economy
The death of the mall – and traditional brick and mortar retail – may or may not be over-exaggerated. But today’s environment certainly creates an opportunity for traditional retailers to change how they approach their business, and even possibly change their entire business model.
For the most part, brick and mortar stores cannot compete (and win!) with online retailers based on price or convenience. Whether it’s shoppers selecting products in-store, and then purchasing them from an online retailer at a cheaper price, or free(ish) next-day or same-day delivery from Amazon or Walmart, traditional retailers who try to compete there will more than likely lose. Instead, the retailers who will win will be those who embrace the experience economy and do so in ways that are on-brand, enhance customer engagement and exploit customer enthusiasm.
Let’s look at why and how retailers can and should become purveyors of experiences, rather than simply being sellers of products.Traditional brick-and-mortar retailers should become purveyors of experiences, rather than simply being sellers of products. Click To Tweet
The Opportunity with the Experience Economy
According to McKinsey, “personal-consumption expenditures (PCE) on experience-related services – such as attending spectator events, visiting amusement parks, eating at restaurants, and traveling – have grown more than 1.5 times faster than overall personal-consumption spending and nearly 4.0 times faster than expenditures on goods. In “Cashing in on the US Experience Economy,” “consumers of all ages are opting for experiences.” The McKinsey report attributes the interest in experiences over goods to three key factors: a stronger link to happiness; the quest for “likes”; and a fear of missing out (FOMO).
Retailers who can deliver a unique experience – one that outweighs the online benefits of convenience and cost. But those experiences must be valuable, authentic, and relevant to customers. Anything that smacks of a gimmick is likely to fail. Most importantly, retailers should view the experience economy as a strategic opportunity to not just sell products, but to also create a stronger, more meaningful bond with their customers. Simply viewing it as a defensive action to combat online retailers will not be effective or successful.
Retailers Embracing Experiences
Many retailers are already pivoting to provide more than just a product to purchase. Sephora, which arguably was a ground-breaker in experiential retail with its approach to letting customers “play” with products in the store, continues to offer compelling reasons to go to their locations versus simply buying products online. The company offers beauty services and classes, and leverages technology in its Sephora + Pantone Color IQ matching device. It was originally used for matching foundation with skin tones and has since been enhanced to include matching lip and concealer colors. Sephora has several Beauty Tip (Teach, Inspire, Play) Workshop concept stores, which combine hands-on education with virtual experiences. Its new Digital Makeover Guide offers an interactive face chart that is a “record of the specific service the client received combined with customized product and application tips.” This is sent to the client via email; it is the first digital take-home-tool offered by Sephora.
The Canadian outdoor retailer Roots has become an iconic Canadian brand with a rich heritage of premium apparel, leather goods, accessories, and footwear. Last year it opened an “enhanced” store in Toronto. This concept store, the Roots Enhanced Experience Store, leverages the heritage of the brand, while also providing a modern customization shop. That location also offers an “enhanced fitting room lounge experience” and a dedicated spot to pick up online orders. The company has since opened additional concept store locations, which will have regularly refreshed installations and products and badges exclusive to each location.
Other experiential retail locations, cited in Retail Dive’s “22 Experiential Stores NYC has to Offer,” include Adidas, where customers can watch sports, run, and test out equipment; American Girl, which features not just their famous café, but also a Girl-and-Doll Salon and a design studio to customize outfits; and Converse, with a customization lab.
Leveraging FOMO (Fear of Missing Out)
Disney understood and capitalized on fear of missing out well before FOMO became part of today’s jargon. For decades Disney has offered products that are only available at its parks and resorts – if you didn’t buy it while you were there, you lost your opportunity to get it. Today, Disney has extended the “specialness” of park and resort-only products by having products with resort logos available only at those resorts, having a Disney Travel-Accessories-Gear (TAG) store at Disney Springs that offers items that can only be found there and nowhere else – even on property, as well as other strategies. The company complements its brick-and-mortar approach by offering some park-specific products online at the same price as in the parks. It has also facilitated online shopping while on-site, through its Shop Disney Park app, which lets guests find which stores and locations have specific items. Guests can purchase products through the app and have their purchases delivered to their resort, making it not only easy to buy, but also eliminating the need to carry purchases through the park.
Sephora’s Sephora + Pantone IQ Color matching device is just one example of a technology that creates a unique experience. Another example is Oak Labs’ digital dressing rooms that have interactive touch-screens where shoppers can select products to be brought to their dressing rooms, and Lowe’s LoweBot.
The LoweBot, developed by Lowe’s Innovation Labs, and introduced in 2016, is a NAVii autonomous retail service robot. It helps customers find products and assists them in navigating the store. It can help customers with simple questions, freeing up employees to provide more valuable expertise and knowledge to customers. It also monitors inventory in real-time, giving the company valuable data for product and product-placement decisions.
The LoweBot is just one of Lowe’s Innovation Labs projects. Other now available retail innovations include:
- Lowe’s 3D, which transforms physical product catalogs into 3D, allowing customers to view products in their homes
- Lowe’s Holoroom, a virtual reality home improvement design and visualization tool that delivers an immersive, intuitive experience
- Lowe’s Hologram Experience, which lets customers view physical objects and digital holograms merged while standing in a showroom kitchen
While many might think of “experience-creating technologies” as just about augmented reality and virtual reality, it’s important to look at the bigger picture of technologies than can enhance the customer’s experience. In the case of the Shop Disney Park app, it’s not necessarily sophisticated technology that enhances the experience. It’s the overall customer service aspect of finding specific products, making it easy to buy them, and then delivering the product to the guest’s room.
The future of brick and mortar retail will come via many different approaches. The victors will be those who know and understand their customers, deliver an engaging, interesting, or educational experience, and do so in a way that takes convenience and cost out of the equation.Retailers who who know and understand their customers, deliver an engaging, interesting, or educational experience, and do so in a way that takes convenience and cost out of the equation will survive and thrive.Click To Tweet