With holiday online sales increasing every year and mall traffic declining, there’s no doubt that the future of retail is in the digital. But while ecommerce numbers are still going strong, new reports are showing that consumers, particularly millennials, are no longer that interested in material products, and would rather spend their income on live experiences.
Consumer spending habits are fundamentally changing. In fact, even Amazon has started to struggle, reaching a plateau in Prime membership. What does this mean for retailers?
Experiences Over Stuff: Where Millennials Spend Their Money
Millennials, defined as Americans born between 1980-1996, are increasingly spending more on travel, restaurants and event tickets, and less on fashion, beauty and other commodities. For this generation, creating, sharing and capturing memories matter more than possessions.
According to nationwide research by Harris Poll and Eventbrite, 78% of millennials would rather spend money on a “desirable experience or event over buying something desirable.” In fact, more than 8 in 10 millennials have attended a variety of live experiences in the past year, ranging from concerts, festivals and parties to performing arts and sporting events.
What’s more, 72% say they would “like to increase their spending on experiences rather than physical things in the next year.” In other words, millennials would rather spend their paychecks on live experiences with friends and family rather than add clutter to their closets.
This trend of desiring experiences over possessions may be one of the reasons many traditional retailers are closing stores. By contrast, air travel spending hit record levels in 2015, and restaurant sales were also up by 8%, easily trumping the retail industry’s overall 2% increase.
FOMO and Social Media as Main Drivers of Experiential Spending
Why are millennials spending more on experiences compared to older generations? The Harris Poll found that factors, such as craving for recognition and FOMO (Fear Of Missing Out) greatly motivate this desire for experiences. In fact, 69% of millennials experience FOMO, often fueled by their friends’ social media broadcasts.
A separate study by StubHub, an eBay subsidiary, found similar results correlating live experiences with social media sharing. StubHub surveyed 2,000 consumers in the U.S. and found that 78% of respondents would rather tell friends about something they did, rather than something they bought.
In fact, according to 31% of respondents, “one of the best parts about attending live events” is “posting about it on social media.” Research suggest that live experiences are best enjoyed when captured, augmented and shared on social media.
Making Shopping Desirable: A Challenge for Retailers
“Life experiences outweigh gifts,” said Scott Cutler, president of StubHub. On Cyber Monday, the online ticket company’s gift card sales grew by 25% over the last year. Consumers are increasingly choosing to gift live experiences over physical gifts, and this shift is slowing the growth of the retail industry.
According to the Washington Post, this new mindset is making a “tough environment for many retailers, who now must not only duel with one another for business but must try to persuade legions of consumers to essentially make a lifestyle change: trade filling up their calendar with activities for filling up their closets with stuff.”
Perhaps a big reason why convenience matters so much in retail is because shopping has become more of a chore, rather than a desirable experience. Convenience is the reason why consumers sign up for Amazon Prime. Millennials rarely consider shopping fun.
So the challenge for retailers is this: how can we make shopping not only convenient, but also a fun, social and desirable experience worth sharing on social media? Instead of asking, how can we get consumers to buy our products, retailers should be asking, “How can we give customers great memories and experiences?”
Tech-smart and social-savvy businesses have started to answer these questions. Retailers engage customers through social commerce and real-time marketing; Pinterest continues to add ecommerce and social sharing features; and eBay is trying to transform their marketplace into a bazaar for product discovery.
Physical retail can be a space for desirable live experiences. For instance, Target has been experimenting with concept stores, adding more in-store dining options, and Barnes & Noble is opening stores with restaurants and bars.
Beyond live experiences, online retailers today can capitalize on customer desires by understanding what drives them. For millennial consumers, the fear of missing out drives them to create, capture and share memories on social media.
One thing is for certain - retailers cannot stay stagnant as they are. Retailers that innovate and invest in the customer experience will be the ones to reach the top.