Exploring The Millennial Shift Towards Buying Experiences Over Things

As people are moving away from spending money on material objects, this is how the traditional retail format can survive.

Millennials are well on their way to outnumbering Baby Boomers as America’s largest adult generation, and they just so happen to be in their prime spending years. That said, the past decade has seen a massive shift in consumer spending habits, and – like so many other things in life – millennials seem to be to blame.

According to the Harris Report, “72% of millennials prefer to spend money on experiences than on material things.” Instead of prioritizing fancy cars, designer handbags, and suburban McMansions, millennials are instead spending their money on mini weekend getaways, trendy brunches, and Coachella-style open air concerts.

It begs the question – why?

Why Do Millennials Value Experiences Over Things?

Many thought authorities on the topic say that the millennial preference towards buying experiences over things can be attributed in a large part to social media. The millennial generation is the first population of people to grow up in the digital age of Facebook, Instagram, Twitter, and Snapchat, where seemingly everything needs to be documented and shared in order to gain the approval of others. There’s even a popular saying to reflect this sentiment: “pics or it didn’t happen!” Sure, you could “technically” post a photo of a brand new 70” LED TV, but it probably wouldn’t garner nearly as many “likes” as a perfectly filtered shot of the San Francisco skyline.

Whether or not you agree with or condone this modern “Look at me! Look at my friends! Look at what we’re doing!” style of life, it doesn’t seem to be going anywhere anytime soon. Instagram – the world’s largest photo-sharing platform – has more than one billion users, and that number will most likely increase as time goes on. Millennials like to share their every movement online, painting a pretty picture of an adventurous, experience-driven life. Since people are inherently competitive by nature, seeing a picture of an old high school friend taking a dip in the azure seas of Bali will  undoubtably push you to plan your next beach vacation. It’s all part of a larger cultural phenomenon known as the “experience economy,” which prioritizes memories over material possessions.

Instead of prioritizing designer handbags, millennials would rather spend money on mini weekend getaways

What Is The “Experience Economy”?

The Harvard Business Review explains the idea behind the “experience economy” quite well: “An experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event. Commodities are fungible, goods tangible, services intangible, and experiences memorable.” As millennial consumers continue to flock to this new trend of spending money on experiences, the trillion-dollar marketing industry has taken notice. In fact, Bizzabo estimates that 41% of marketers now believe that events are the single-most effective marketing channel over digital advertising, email marketing, and content marketing.

Fair enough. Where money goes, marketers will always follow. But what does that mean for the retail industry, which has traditionally marketed itself on its superior ability to sell physical products like shoes, clothes, makeup, and home goods to the new generation of experience-obsessed Americans? If people are moving away from spending money on material objects in search of life-enhancing experiences, how will traditional retail survive?

The answer is simple: to survive, traditional retail needs to change.

T0 survive, traditional retail needs to change!

How Can Retail Change To Satisfy Millennial Shoppers?

Along with real estate, casual dining chains, and yes – even napkins – millennials are often blamed for the death of retail. And, honestly, it’s for a good reason. According to Digital Commerce 360, “online retail sales in the U.S. crossed $517 billion in 2018, a 15.0% jump compared with 2017.” But even with the growing popularity of online shopping, it’s estimated that 40% of millennial consumers still prefer to shop in physical brick-and-mortar stores. But why?

No longer do millennials enter retail environments just to spend money on stuff – they can just as easily do that online. Instead, they shop to enjoy the experience of browsing, to interact with other humans, and to feel like they’re connected to a larger cultural trend. Because of social media and the ability to closely interact with brands online, millennial shoppers are beginning to expect more from the companies they patronize in person; they want to feel a personal connection and cultivate an enriching experience.

That’s not to say that every single interaction with a company has to be life changing. Something as simple as ordering a glass of wine at a Mariano’s bar to sip on while you grocery shop can elevate a once-mundane chore into an exciting, multi-sensory culinary adventure. Like Mariano’s, companies of all kinds across all industries are recognizing the need to DO MORE for millennial consumers, and they’re providing three valuable lessons for other retailers in the process:

1. Focus On The Customer Experience

Unlike online outlets, retail environments allow people to see, touch, and experience products in action before they buy them. That means that retailers need to re-think how they’re setting up displays and designing store layouts in order to enrich the overall shopping experience. Not only is retail merchandising an effective in-store marketing tool, but studies have shown that beautiful displays and clean, organized shelves actually entice shoppers to spend more time in retail environments, and therefore spend more money.

A recent article by Forbes bolsters the notion that retailers need to focus on cleanliness above all else when creating positive customer experiences. According to Forbes, “In a survey of 1,521 consumers, 70% said they recently have had a negative experience with a messy store, ranging from dirty bathrooms and broken toilets, to disorganized shelves and burned-out light bulbs.” What’s more, over 2/3 of consumers have actually walked out of stores because they were messy or disorganized.

As soon as a company cuts back on store maintenance and retail merchandising, they lose shoppers. It’s as simple as that. In order to survive in the modern commerce world, retailers need to focus on the entire experience that surrounds shopping – not just the products they’re selling. Retail merchandising and maintenance used to be put on the budgetary back burner, but retailers cannot afford to think like that anymore. Now, those seemingly small details directly impact a company’s bottom line.

2. Enhance In-Store Customer Service

Millennials rank customer service as very important, with 67% of U.S. consumers agreeing that good customer service encourages them to shop longer and/or spend more money. Since people can buy practically anything with a simple touch of a button, there isn’t really a “reason” consumers NEED to step in physical retail locations, unless they see some type of added value that doesn’t have an equal digital counterpart.

For that reason, retail locations need to focus on enhancing in-store customer service. Of course, that doesn’t mean that customer service representatives should follow in-store shoppers, annoyingly asking them if they need help every 5 minutes. That would turn anybody off. However, customer service representatives should be expertly trained and ready to answer questions of all kinds from customers. Whether that question be, “which aisle has lightbulbs?” or “how does the iPhone 11 Pro Max camera compare to the iPhone X?”

As Money.com recently pointed out, store associates aren’t just there to stock merchandise. Instead, they need to provide education, build personal relationships, and enhance retail reputations. And, it seems like America’s top retailers are willing to pay for that level of service. Compared to the national average for sales associates ($12 per hour), today’s thriving retailers like Bonobos pay their employees $17 or more, because – after all – this isn’t your average high school job. If you need further proof of this trend towards enhanced customer service, just look at Walmart, who recently spent $2.7 billion on training programs to improve customer/employee interactions.

3. Create Omnichannel Shopping Environments

“Omnichannel” is the most popular buzzword in retail right now. Essentially, omnichannel refers to a brand, retailer, or company that employs and connects more than one medium to communicate and do business with its customers. Not only do physical brick-and-mortar retail locations need to have an online presence, but they should also be able to connect two, three, four or more separate entities to create one seamless, cohesive experience for people, no matter where they are or how they like to shop.

A company that does this very well is Target, who just scored #2 in Internet Retailer’s Omnichannel Report. According to Digital Commerce 360, Target not only allows customers to buy items online and pick them up in store, but they also offer “innovative omnichannel features, such as curbside pickup and in-app directions.” By paying attention to the changing digital landscape and modern consumer requirements, Target has adapted its business model to make shopping – both online and off – an easy, convenient, and rewarding experience.

By creating an omnichannel presence, retailers can drive meaningful interactions and enhance the customer experience. Just like Target allows its customers to create their own purchase path, omnichannel brands make shopping with them as simple and stress-free as possible, thus fostering a sense of loyalty among their fan base. Omnichannel retail locations give the power back to their customers by letting them choose how, when, and where they want to interact. It’s this sense of freedom that consumers find attractive, and it’s what keeps them coming back for more.

Retailers need to re-think how they’re setting up displays and designing store layouts in order to enrich the overall shopping experience

How Can Retailers Plan For The Future?

After all’s said and done, a retailer’s #1 priority will always be to sell products to consumers. That’s ultimately how they make their money and keep the lights on. However, with so much competition for where and how to shop, retailers also need to prioritize other initiatives. By spending more energy on enhancing in-store experiences, customer service, and omnichannel strategies, retailers can begin to compete in the modern commerce landscape.

However, that’s easier said than done. With so many moving pieces to think about like planogram executions, compliance verifications, and inventory shipments, it can be difficult to change gears and convert priorities without letting anything slip through the cracks. For that reason, many retail locations have made the decision to partner with third-party companies who can handle day-to-day operations while the retail management team focuses on big picture planning.

Enter Strategic Retail Solutions. SRS is a leading third-party retail merchandising company that provides strategic solutions to manufacturers and retailers all across the country. With more than 100 years of retail merchandising experience, we help companies of all sizes modernize their goals by performing compliant and effective programs on behalf of retail locations, all while keeping our partners in the loop with state-of-the art reporting technology.

If you’re a retailer looking to plan for the next generation of shoppers, SRS can help. Contact us at sales@srsmerchandising.com or (513) 272-3439 to get started.