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The New Rules of Retail

As the heart and soul of the Shoreline economy, local retailers have had to keep pace with revolutionary change. In this exclusive excerpt from The New Rules of Retail, two retail gurus weigh in on some of those changes.

With so many closets, kitchen and garages full of stuff, the appetite to keep buying more is falling dramatically. Another study, at Cornell University, measures the comparative satisfaction of material versus experiential purchases over time, and the results are startling. The level of satisfaction drops dramatically for material purchases and increases for experiential purchases. “We found that participants were less satisfied with their material purchases (than experiences) because they were more likely to ruminate about unchosen options…and that, relative to experiences, satisfaction with their material possessions was undermined more by comparisons to other available options. Our results suggest that experiential purchase decisions are easier to make and more conducive to well-being.”

These studies and many more overwhelmingly suggest that consumers in pursuit of “happiness” will be acquiring more experiences. Another reason for choosing experiences is that they are co-created by provider and consumer, making their perceived value much higher than their price. Conversely, the price of goods is most often intrinsic to their physical value. For example, A&F provides the environment of a “cool, sexy” shopping experience, and Lululemon Athletica provides yoga classes. However, the consumer, at the moment he or she is in the environment, is reacting and shaping that experience to themselves, to make it complete. And not only does the uniqueness of the co-created experience elevate its value, but it is also conceptual and temporal (a one-time happening). Conversely, everyday consumers can look at their “stuff” and reflect whether the car, TV, phone, or pair of jeans was really the best purchase they could have made.

Moreover, because of the temporal and individual nature of experience, the evaluation is also fleeting. It is almost impossible to systematically evaluate and com- pare whether the purchase of one experience was better than other options, particularly when the experience is predominantly part of the consumer’s memory. Therefore, while products can be evaluated on the basis of physical and common criteria, co-created, unique experiences cannot, making the pursuit of them more anticipatory and exciting. Finally, and more significantly, consumers will pay more for an experience than they will for stuff.

Yet another perspective on too much stuff comes from Barry Schwartz’s book The Paradox of Choice: Why More Is Less. He points out that “piles of stuff” in a store, while attempting to create the positive impression that there are plenty of options, actually have the opposite effect. Rather than making consumers happier with such abundance, it frustrates and exhausts them before they even begin to shop. So not only is it an unpleasant experience, it’s actually a turnoff. Well-edited retail brands, on the other hand, which know their consumers’ likes and dislikes, provide an emotionally connecting experience in which less is more. A good example would be Trader Joe’s, where there is a more limited selection of each category than in traditional grocery stores, yet it consistently surpasses its consumers’ expectations. An often heard remark is that “Trader Joe’s knows what I want!” Another example is Lane Bryant, a sportswear specialty chain that caters to plus-size women. According to its former CEO, Dorrit Bern, in an interview in the late 1990s, its customers are fierce loyalists who feel that Lane Bryant knows exactly what they want and is an advocate for them.

Because of demand shifting toward experiences, the new rules of retail are being led by those who want to blur the distinction between a material purchase and an experiential purchase. For instance, consumers are no longer satisfied with buying pants or jeans off a shelf, an item they
don’t need one more of. They will, however, seek the sensual, clublike experience of shopping in Abercrombie & Fitch (A&F), the young men’s and women’s casual sportswear chain. This experience starts with a roped-off entrance, complete with a bouncer, and includes a low-lit interior, loud rock music, sexy posters, alluring fragrance scents wafting throughout and sexily clad sales associates. Or consider Tommy Bahama’s laid-back island resort store, which sells higher-priced casual wear for men and women, and where the layout opens onto a restaurant and bar, with live music playing throughout. Consumers will spend twice as much time enjoying the experience and will pay twice as much for a complete outfit than they would have in a traditional store—or, in the best-case scenario for the retailer, the experience itself might compel them to buy “just one more.” It’s the difference between buying lingerie off a rack in a department store and buying the experience provided by a Victoria’s Secret, or between buying Barbie dolls or teddy bears in toy stores and creating your own, complete with names, birthdays—essentially an entire life story—in the festive, fun-filled workshops of the American Girl and Build-A-Bear stores. It’s the move from plain old sporting goods stores to Cabela’s, which offers free fly fishing lessons, two-story mountains, waterfalls, trout ponds, etc. It’s the difference between buying Maxwell House in a can and the Starbucks experience.

Other sectors have their own experiential standouts. They include the great shopping experiences at the new Apple computer stores, the flash sales on eBay and Zappos.com, all of which set the standard for emotionally connecting service. There are also the fresh, fun, food emporiums Whole Foods and Trader Joe’s, supermarkets unlike any other. The future of retailing is also foreshadowed by the growing propensity among consumers to move away from shopping in big stores, preferring instead the cozy experience and differentiated products in the growing number of independently owned neighborhood boutiques, like Junkman’s Daughter in Atlanta, Georgia, which sells wigs, vintage apparel and costumes, all in a glittery, offbeat and wildly designed environment.

It’s not just in the specialty retail brands or the independent mom-and-pop stores, though, that consumers expect an elevated experience. They expect every major retailer, from Wal-Mart to Neiman Marcus, from Home Depot to Best Buy, from McDonald’s to the Outback Steakhouse, to provide a pleasant experience. Disney’s retail component is repositioning all its stores to focus on elevating the shopping experience. From games to entertaining events to robust audiovisual presentations, it’s all aimed at creating an emotionally connecting experience. Starbucks’s recent unraveling was largely the result of losing its focus on experience, which was the core driver of its exponential growth, for the sake of cutting costs and pursuing an accelerated global growth strategy that was more efficiently executed with fewer experiential amenities. It is now desperately attempting to reinstate the experience. More and more traditional retailers are following suit. Of Bloomingdale’s recently opened store in Dubai, their CEO, Michael Gould, was quoted in Women’s Wear Daily as saying, “It’s all about selling the experience.”

Image Credits: Illustration courtesy of Shutterstock

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