Experience matters

It is difficult to escape the cliché formed around the subject of experiential retail, but is this a trend that is here to stay, or a fad that will fade once the structural changes in the retail market have worked their way through? The answer is, in a great paper on this subject by my colleagues in the US, that it is here to stay. You can read a copy of the report here and I paraphrase as follows. Our economy has over centuries increased in the complexity of the products created, from agrarian commodities, though standardised industrial goods to specialised service offerings. However, as all products (including services) have become to a degree commoditised by globalisation and technological processes, the next layer of added value comes from differentiated experiences. The experience is not just a lure to an established product, but a new economic category of itself. Experiential purchases make people happier than material ones, and 72% of millennials prefer them for this reason. They are also less comparable, and so the price point is more defensible. In the age of Amazon, convenience of location for retailers is much less of a factor of competition, and for most retailers, value is a hard to find in competition with the discounters. Hence experience is a driving factor for physical retail that will continue to be relevant in the future.