SAINT PAUL, United States — Retailers the world over need to understand that we have entered the Experience Economy. Goods and services are no longer enough; what consumers want are experiences — memorable events that engage each individual in an inherently personal way. For retailers to survive and thrive tomorrow, they must understand the ramifications of today’s fundamental shift in the very fabric of the economy.
Merchandise will be commoditised
Consumers will want to buy goods at the cheapest possible price and the greatest possible convenience. Meaning, they will continue to buy more and more merchandise online. Only hypermarkets that pile it high and wide have any hope of competing on price. Everyone else will have to subsume their merchandise within an experience that engages consumers.
Stores will become showcases
The primary reason people will come into physical places in the future is because they seek experiences, so retailers must design and build places that showcase the “experience” of the merchandise they have for sale. If you get your customers to experience your goods, the chances they will buy those goods increases.
Manufacturers will become the competition
If you think retail faces commoditisation, imagine how badly off manufacturers are! As they see their margins pinched and their channels marginalised, more and more manufacturers will decide to go into retail themselves, creating relationships with end consumers while showcasing their own offerings. They’ll realise that the experience is the marketing! The best way to generate demand for any offering is an experience so engaging that customers can’t help but spend time, give their attention and then buy the products they have experienced.
Time will be the currency
The primary measure of retail success will be how much time consumers spend with you. When buying commoditised goods, consumers seek time well saved — buying at the cheapest possible price and the greatest possible convenience. Why? In order to spend their hard-earned money — and harder-earned time — on the experiences they enjoy. With experiences, it’s all about time well spent. Sales, revenue, profit margins — for stores, all will depend on staging great experiences.
Omnichannel will become context queues
While retailers today pursue an omnichannel approach to try to surround consumers, all the better to carpet bomb them with messages, in the future they have to fight for the limited time consumers have available in their digital lives. As strategist Dave Norton explains in his book Digital Context 2.0, retailers must already be in consumers’ context if they hope to be used for digital purchases. Consumers have “queues” in their thinking process, with smartphone tools they turn to time and again when in the market for something, yielding time well spent and time well saved.
Retail will be digitally infused
Not only are we shifting to an Experience Economy, but the experiences we have and desire will increasingly embrace digital technology, fusing the real and the virtual. Virtual Reality devices will be used in stores to show off merchandise that is not there physically. Augmented Reality will be used to let people interact with, and learn more about, merchandise that is there physically. And amongst many more possibilities that could be cited, 3D printing will be used to design virtual merchandise and then make it real physically.
Customisation will be key
Anything that can be digitised can be customised, so in the future retail must be more and more customised — yet on a high-volume, efficient basis. Mass customising reaches inside of individual consumers, making it easier to create that experience within them, which will forestall the forces of commoditisation and bring us back full circle to where we started.
Actually, while all this is the future of stores, none of this is new. As science fiction writer William Gibson wrote, “The future is already here — it’s just not evenly distributed.” So each one of these predictions are in fact present to one degree or another, even if mostly on the fringes. Going forwards, they will increasingly separate the wheat (merchandise-based experiences) from the chaff (commoditised goods).
B. Joseph Pine II is the co-founder of Strategic Horizons LLP and author of books including The Experience Economy.
The views expressed in Op-Ed pieces are those of the author and do not necessarily reflect the views of The Business of Fashion.