Are experiences stealing discretionary dollars away from retail?

Discussion
Photo: Getty Images/Jeremy Poland
Jan 04, 2023

Falling coronavirus case levels and fewer restrictions drove a strong recovery in spending on experiences (i.e., travel, dining out, live events) in 2022 and they appear to be continuing to take significant discretionary dollars away from retail.

Mastercard SpendingPulse found in-person dining grew 15.1 percent from November 1 through December 24, as co-workers, friends and family held long-delayed gatherings. That’s double the 7.6 percent gain in U.S. retail sales.

Steve Sadove, Mastercard senior advisor, said in a statement, “Retailers discounted heavily but consumers diversified their holiday spending to accommodate rising prices and an appetite for experiences and festive gatherings post-pandemic.”

The shift back to spending on experiences follows record spending on goods earlier in the pandemic as people huddled in their homes.

According to a study released in October by the American Hotel & Lodging Association (AHLA), U.S. hotel leisure travel revenue was expected to expand 14 percent in 2022 versus 2019 levels. In September, U.S. restaurant reservations surpassed pre-pandemic levels, according to OpenTable.

In August, concert promoter LiveNation reported second-quarter attendances across its venues advanced over 20 percent versus the comparable 2019 quarter.

The economy’s reopening has resumed the broader shift towards the “experience economy” that has seen consumers seeking out memories in favor of material possessions.

A global survey from Momentum Worldwide conducted in October 2019 found an overwhelming majority (76 percent) would rather spend their money on experiences than products. The study found “inspiration and meaning” as the most sought-after quality in brands, a 200 percent increase in those attributes versus a 2012 survey.

According to U.K.-based data provider Refinitiv, hotels, restaurants and leisure is expected to be the only consumer-related industry to see positive growth in the fourth quarter as job concerns weigh on overall spending.

“Consumers have moved away from splurging and are going towards experiences,” Jharonne Martis, Refinitiv’s director of consumer research, told CNBC last week. “Not only do they want to go and eat out but fine dining and casual dining are outperforming quick service. So they want to go in the restaurant, have an experience, and pay the higher prices despite inflation.”

DISCUSSION QUESTIONS: How much of a factor has the spending shift toward experiences (i.e., travel, dining out, live events) been on retail in recent months? Do you see the appeal of experiences continuing to grow in 2023?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"With upper income households, experiences are going to continue to take spend away from retail, and yes, the trend will continue in 2023."
"Despite all the hoopla about goods vs services, the dollars will still feed into both pools, for the simple reason that much of our experiences are highly dependent on goods."
"Younger generations have embraced the 'less is more' and 'secondhand is cool' ethos, and it’s trickling into the larger population."

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26 Comments on "Are experiences stealing discretionary dollars away from retail?"


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Neil Saunders
BrainTrust

Before the pandemic in 2019, services accounted for 68 percent of consumer spend. In 2020/21, this dropped to about 64 percent as people shifted away from travel and entertainment. Some of this money was diverted to retail, which is one of the factors behind the boom in sales during 2021. The tide is now flowing in the other direction as people get back out into the world. Despite all of this, retail sales growth is still holding up extremely well given all that’s going on with the economy.

Lee Peterson
BrainTrust

This may seem irrelevant but bear with me. The definition of the metaverse (which doesn’t exist — yet) is “the perfect you (avatar) in whatever setting you choose.” So it seems to me that, given that, no one would want to go shopping using that tool at all! The experience itself would overshadow the enjoyment of spending encounters. So you would think retailers shouldn’t worry about the Metaverse. BUT NO! We surveyed over 1,000 people in the U.S. about metaverse usage and, lo and behold, shopping ranked #2 behind gaming and ahead of any other experience, including travel. Stunning. So when it comes to experiences, I guess we’re soon going to have to qualify “real” experiences vs. virtual because, as it turns out, customers don’t prefer experiences in the metaverrse, only in real life. This news already made my year — whew. Thanks for sticking with me, happy New Year.

Gene Detroyer
BrainTrust

I still don’t get the metaverse.

Lee Peterson
BrainTrust

A tech writer told me simply that it’s “your ideal self in an ideal environment (for you)” — he also said, “it doesn’t exist yet.” So, you’re not alone! All the professed Metaverse stuff out there now, including Roblox & Meta themselves, is game engine stuff. Not the intended future.

Gene Detroyer
BrainTrust

Thank you. My ideal self would like to be on a beach in a warm environment….

Jasmine Glasheen
BrainTrust

We need to stop seeing experiences and retail purchasing as diametrically opposed. While it’s true that consumers are starved for life, staring down the barrel at year three of a global pandemic, retailers can provide interactive experiences just as easily as the travel industry.

Retailers today have more options than ever to create can’t-miss experiences for customers — musicians, art installations, performers, themes, interactive sports, the metaverse, AR — there’s really no excuse for having the same store and inventory every day. So yes, the draw to experiences will continue to grow, but retailers can get in on the market share.

Georganne Bender
BrainTrust

Retailers have talked about the importance of the in-store experience for years, and we all lose our minds when a new store opens that offers something slightly different. But at the end of the day most shopping isn’t an experience; it’s messy stores, not enough associates, boring merchandise and lots of sale signs. Of course travel is more exciting. So are the shops one encounters because they are new to travelers.

So what’s a retailer to do? How about creating and recreating the shopping experiences customers remember and loved? We talk so much about new technologies – and technology is important – but what happens on the sales floor, unique product, beautifully displayed, and how it feels to be there, is overlooked in too many stores. If we want to bring customers back these areas need immediate attention.

Jenn McMillen
BrainTrust

“Purge evangelists” such as Marie Kondo and the Home Edit team, plus the ever-popular “10 Day Decluttering Challenge” and its ilk, are sending messages to consumers to buy less. Younger generations have embraced the “less is more” and “secondhand is cool” ethos, and it’s trickling into the larger population. Heck yeah, retail is going to feel the pinch. In the U.S., we have 14 percent of our commercial real estate dedicated to retail. In Europe, it’s 7 percent. Something’s got to give.

Gene Detroyer
BrainTrust

Yes, “younger generations have embraced the ‘less is more’ and ‘secondhand is cool’ ethos.” You describe my 17-year-old granddaughter precisely.

Karen S. Herman
BrainTrust

Yes, the appeal of memorable retail experiences will continue well into 2023 and beyond, as consumers continue to look for immediate gratification IRL (in real life) as a response to the pandemic, personal adaption to technology and the changing retail experience. The metaverse has fallen by the wayside as consumers rush to enjoy in-person shopping and interacting with brands and retailers again. Both can really adapt now and be truly disruptive with short-term offline retail formats that start online with any device and are fulfilled offline, in authentic, memorable and experiential ways.

Andrew Blatherwick
BrainTrust

We have talked for a long time about making retail visits an experience. People are looking for something more than just buying “stuff” — they need to get enjoyment from the experience as well. Retail can provide the experience people are looking for and dovetail nicely with the trend towards experiences.

Jeff Sward
BrainTrust

Sounds to me like people just want to get back to participating in social interactions. That might be the gift that the pandemic gave us — an appreciation for the everyday experiences that we missed out on for 2+ years. If you had asked me three or four years ago if I looked at going out to a restaurant as an “experience” I would have said, “huh?” I have come to summarize this phenomenon as “Explore + Experiment + Execution = Experience³” The role of the retailer, or restaurant, or mall, or event is Execution. Given the right forum, the customer will absolutely want to Explore + Experiment. And maybe even buy something.

Gene Detroyer
BrainTrust

There is no question that experiences are trumping “things.” That trend was growing before the pandemic and it will now accelerate. Just this Christmas the big present was taking all the grandkids and dads to see a Brooklyn Nets game.

I imagine that the trend is growing across all demographics. For us Boomers, what don’t we already have? For those out in the world on their own for the first time, are they talking about the next pair of sneakers or planning the next dinner or travel with friends?

Scott Norris
Guest

Likewise, us Gen-X don’t need to check any more boxes for things — the breadmaker and InstantPot are wonderful, but they’ll last until we are ready to retire. So instead for Christmas we went to see friends out in California we hadn’t been with since the beginning of the pandemic. And this spring break we’re taking our daughter to Tokyo (admittedly a shopping trip for clothes and shoes in her sizes, as American chain stores don’t cater well to Asian women’s sizing needs).

Gene Detroyer
BrainTrust

I am sure Christmas was terrific, and Spring Break will be extraordinary.

Dave Bruno
BrainTrust

When it’s at its best, retail is an experience. Merging shopping and experiences — by bringing the store to the experiences or the experiences to the store — remains a winning strategy. Technology makes it much easier for retailers to go where their customers gather, and to deliver experiences that encourage them to gather in their stores.

Mark Self
BrainTrust

With upper income households, experiences are going to continue to take spend away from retail, and yes, the trend will continue in 2023. My very unscientific survey results (me) show that people have too much stuff and therefore disposable income will continue to trend toward experience spending!

Nicola Kinsella
BrainTrust

Absolutely! People are craving experiences. While some of them will trigger additional purchases — like travel accessories and “going out” clothes — it won’t be enough. Retailers need to pivot. The act of shopping hasn’t changed all that much over the years. How can it be different? More exciting? More interactive? To thrive, retailers will need to challenge the status quo experience. Innovate. Provide something new and fresh. Take the blending of physical and digital experiences to the next level.

Phil Rubin
BrainTrust

At this point in the cycle, this isn’t necessarily an either/or question, especially as we get further from the pandemic lockdown where there was no travel, no events and little to no out-of-home dining. It is, over the short-term, clear that consumption of “things” spiked during the pandemic at the expense of consumption of “experiences.” Further, we all realize(d) the value of actual, physical experiences as opposed, and superior, to consuming purely digital or “metaverse” experiences.

Good retail, like good experiences, should do well while bad retail, like bad experiences (e.g., Southwest Airlines) should suffer in a free market economy, especially a relatively strong one.

Gene Detroyer
BrainTrust

If each of us ranked the top 10 (or 20) things we have experienced, a vacation, dinner with friends, watching a movie or Broadway show, going to a sports event or participating in sports, would our best retail experience make the list?

Ananda Chakravarty
BrainTrust

That’s a great question Gene. I’ll take a swipe at it- believing that if it was that good a retail experience, we would never classify it as retail. An example might be going to Epcot center, where part of our costs were the food, lodging and souvenirs and trinkets we purchased along with the rides.

Gene Detroyer
BrainTrust

Ah! And an expensive retail experience.

Brandon Rael
BrainTrust

There has been an ongoing battle for consumer discretionary dollars between experiences and retail shopping. With the rise of conscious consumerism, customers recognize the need to be more sustainable with their shopping decisions and a general sense that less is more. With the increase in travel, hospitality, and restaurant spending, retailers will have to up their games to provide more of an experiential retail journey that spans physical spaces, digital commerce, and the metaverse.

While the pendulum may have shifted to services and experiences, it will be critical for the hospitality sector to keep up with customers’ expectations around service, quality, and value for their dollars. With customers always connected, retailers and brands have to do everything they can to meet customers where they are. This could be in the physical store, Instagram, TikTok, and, yes, the metaverse, with the rise of immersive commerce.

Ananda Chakravarty
BrainTrust

Despite all the hoopla about goods vs services, the dollars will still feed into both pools, for the simple reason that much of our experiences are highly dependent on goods. We buy goods to experience and engage in activities like golf shoes for our weekend foursome or canteen for our hike up our local trails. We buy our clothes to impress our peers with the newest fashions and we purchase cage free eggs to keep in line with our belief experiences. Travel and dining have been low during the pandemic but they will return, and with it will be luggage purchases for our trip to the West Coast, blazers for our night on the town, and baseball gloves to catch the fly ball at the stadium.

Craig Sundstrom
Guest

“Dining out” isn’t retail? Obviously every dollar spent in one place can’t be spent in another; so in that narrow sense the $123.50 you spent for a concert isn’t available toward buying a pair of pants or a waffle iron or whatever. But of course the same is true for any of those three purchases … everything competes with everything else, there’s no logic in treating “experiences” any differently.

Shep Hyken
BrainTrust

Experiences versus “things” (material merchandise/products) is not new. I’d love to see a generational breakdown. Who spends more on experiences, Boomers or Gen-Z? Should retailers worry? As retailers have always done, they will adapt to their customers’ interests, the economic conditions, etc.

wpDiscuz
Braintrust
"With upper income households, experiences are going to continue to take spend away from retail, and yes, the trend will continue in 2023."
"Despite all the hoopla about goods vs services, the dollars will still feed into both pools, for the simple reason that much of our experiences are highly dependent on goods."
"Younger generations have embraced the 'less is more' and 'secondhand is cool' ethos, and it’s trickling into the larger population."

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