By Deb Gabor, CEO of SOL Marketing http://solmarketing.com/
The retail meltdown of 2017 has been well documented by both business and mainstream media. Consumers can see it for themselves with every visit to the ghost towns that are our local shopping malls. Some reports estimate the closing of more than 8,600 brick and mortar retail outlets so far, and there’s no end in sight. As they decrease in consumer relevance, department stores like Macy’s, Sears, and JC Penney may be among the hardest hit. Several trends—including the rise of e-commerce, the over-supply of malls, and the surprising effects of a restaurant renaissance—are changing the face of American shopping. While more spending shifts from brick and mortar retail, industry reports show that in 2017, shoppers are devoting bigger shares of their wallets to entertainment, restaurants, and experiences. According to the Bureau of Labor Statistics, in 2016, for the first time ever, US households spent more on restaurants and bars than on groceries. Some of this change is due to increased pricing competition from big box retailers, an uptick in take-out in urban areas, and an increase in cook-at-home meal kit services like Blue Apron, Plated, and HelloFresh. But this shift also signals some important social changes among consumers. It appears that we’re turning our backs on stuff.
A Smorgasbord of Food Options
Traditional grocery is a category that’s been hit hard. We are finally seeing a break in the longstanding pattern in which the bulk of our food spending happens at the neighborhood grocery store. Some of that shift is due to the fact that legacy grocers are in a race with big-box retailers to the bottom, pricewise. But a profound portion of this shift can be credited to a burgeoning sense of “experientialism,” which emphasizes experiences over products. Consumers are flocking to alternative grocery options such as stores that offer curbside service, hands-on cooking classes, or onsite café options. Consumers seek out experiences that elevate their own self-concepts and define them to others. As social media increases in popularity, consumers turn their spending to things that are more Instagram-worthy than a bag of groceries.
Buying Less and Doing More
The shift to experientialism isn’t happening in just the grocery sector. As a society, we are consuming less stuff and doing more. In the late 20th Century, many people acquired material things to help them express themselves and demonstrate their “status” to others. Having and showing off lots of physical possessions seemed indelibly linked to happiness. As a result, many retailers saw their revenues and profits soar. However, in 2017, our spending patterns are shifting to favor live events, travel, and cultural activities, experiences that make for good stories to share with others. For many, happiness isn’t as focused on possessions as it used to be. Living a meaningful, happy life is about creating, sharing, and capturing memories earned through living life. Social media supports this change. Posting pictures of a shirt or a handbag you just bought seems gauche, but sharing pictures and videos of you and your friends jumping out of an airplane in New Zealand, skiing in Chile in the middle of August, or sipping fruity umbrella drinks on a beach in Tahiti are the stuff of today’s dreams – and more profoundly – status.
FOMO Is a Driver
Not only do experiences create life-long memories, they help shape people’s identities. Many people believe that some of their best memories come from events they participated in, not from things they owned. In a world where people broadcast their activities on social media, fear of missing out (FOMO) drives many consumers’ appetite. FOMO on a great event friends are attending drives people to show up, engage, and share their experiences with others. According to the Bureau of labor Statistics, in the past three decades, the share of consumer spending on live experiences and events, relative to total consumer spending, increased by a whopping 70%. People want to experience more, and businesses are evolving and entering the market to drive that demand.
Millennials are entering their earning and spending prime. With most of this cohort currently in the working world, their spending power is estimated to top a $1.3 trillion already. This signals a change in the language of consumerism in years to come. Where buying a first car was an acknowledged rite of passage for previous generations, millennials are more likely to count taking a big overseas trip or attending an iconic music or sporting event (such as Coachella or The NCAA Men’s Basketball Final Four) as a key emotional and economic milestone.
What About Retail?
As retail struggles to maintain an economic foothold, the players can take some cues from shifts in consumer preferences for experiences. Even in today’s experientially-driven economy, brick and mortar retail still has advantages over ecommerce: instant gratification and human touch. Brick and mortar retail is not dead by any stretch of the imagination. Even though ecommerce grows steadily, offline sales still make up more than 90 percent of all retail sales in the US. In order to maintain a foothold, retailers need to change their paradigms to embrace a new kind of consumer with different standards for shopping. Many consumers seek a personalized, customized, shopping experience rather than just a transaction when they enter a physical retail outlet. Retailers who embrace technology to create immersive shopping experiences and connect online and offline shopping experiences in the moment will have an edge over their more traditional counterparts. Additionally, physical retail outlets are in a far better position to forge relationships with customers. Some retailers are already leveraging this advantage by fostering community through in-store events, social shopping, and partnerships with great brands that align with their customers’ own values. Regardless, as online retailers infuse their shopping experiences with technology virtual reality that transform ecommerce from being transactional to immersive and experiential, brick and mortar retailers will need to step it up to compete. These retail brands should embrace the human-delivered experiences they deliver to customers to give shoppers a reason to interact, build community, or share an experience.