If you spend enough time looking at data and studying shopper behavior, the fashion apparel business along with traditional retailing is undergoing a major transformation: Consumers are consuming, but it is not the same as it was before.
Underpinning this transformation is a shift toward spending on experiences over buying “things,” and a push by retailers and brands to make the shopping experience more entertaining.
This story first appeared in the March 2, 2016 issue of WWD. Subscribe Today.
This year, expect traditional businesses, such as apparel brands, to add “experiential” offerings including dining, travel and live events, while technology firms and start-ups will continue to offer innovations that will enhance the shopping experience.
Driving this shift are consumers who value acquiring experiences more than they value acquiring goods. And Millennials in particular reflect this trend by their preference for attending live events, traveling and dining at hip venues instead of spending on stuff — and they enthusiastically record and curate these experiences with smartphone cameras and social media platforms.
Older consumers tend to spend more on travel and tourism, as they lead healthy and active lifestyles even as they age. Naturally, retailers benefiting most from the trend present consumers with experiential offerings, but many technology and sharing-economy start-ups have also capitalized on it by democratizing the travel and lodging industries.
And the data behind these changes are eye-opening.
A recent report from eMarketer shows that 64 percent of Millennials earmark earnings for the piggy bank and to invest, which compares to 45 percent of Gen-Xers and 46 percent of Baby Boomers. The report also noted that when Millennials were asked what was more important, 61 percent said it was experiences over possessions.
Meanwhile, multiple start-ups have entered the scene with new business models that aim to capitalize on these shifts in consumer behavior. For example, Gigzolo is a curated network of musicians and DJs available for hire for events. Zaptravel is a digital travel agent that uses a semantic search engine to scroll through its database, while If Only is an online marketplace for unique experiences that range in price from $50 to $5,000.
As a result, the experience economy will grow significantly. And as traditional businesses — including fashion apparel brands — incorporate an experiential element into their offerings and into stores, the number of consumers who prefer spending on experiences rather than on goods will also continue to grow. And the trend will become more popular not just with Millennials, whose disposable income will continue to grow as they age, but with all demographic groups as smartphone technology (a key enabler of the new experiential business models) is adopted more readily across generations.
Simultaneously, brick-and-mortar retailers will grow into entertainment destinations in a bid to stand out from the online shopping experience.
To help drive in-store traffic and provide a more meaningful customer experience, many brick-and-mortar retailers are returning to prior tactics and strategies, such as offering “retail-tainment” in their stores. They are incorporating in-store events, more interesting and decorative store interiors and interactive elements that fully involve customers in a way that is unique to the brand. This allows brands to provide a personal, tangible experience and engage with customers, and gives customers a reason to come back to the physical store even when they can most likely make their purchase online.
Driving this trend is ongoing declines in retail store foot traffic. Some approaches are often gastronomical: Urban Outfitters, Club Monaco and Kohl’s have all joined the trend of retailers opening coffee shops in their stores. Urban Outfitters took the concept one step further in 2015 by acquiring the Vetri Family group of restaurants, and is reportedly working on opening restaurants in a number of stores.
Technology is also playing a role. For example, fashion apparel retailers Rebecca Minkoff and Tommy Hilfiger have provided shoppers with virtual reality (VR) headsets that allow them to experience the brands’ runway shows.
Don’t be surprised to see brands and retailers experimenting with unconventional food and beverage offerings. More retailers will use in-store technology such as VR to make the shopping experience more entertaining. And we anticipate a proliferation of mobile apps that improve the in-store experience by giving the shopper access to customizable shopping lists, location-relevant promotions and product and inventory information.
Deborah Weinswig, CPA, is executive director and head of global retail and technology at Fung Business Intelligence Centre. Click here to download her report on retail trends and retail and tech trends.