Michael Brown, managing director of agency MKTG, explores the evidence that consumers increasingly want to be rich in experiences.
It was about this time last year that Steve Howard, the chief sustainability officer of Ikea, picked up a bit of heat when he proclaimed that the West had reached ‘peak candlestick’.
The term candlestick was a placeholder for ‘stuff’ – a symbol for the things Ikea sells and, given his job title, he was asking a perfectly legitimate question: how does a business like Ikea remain sustainable in the future if the world really has got too many candlesticks, and too many flat-packed coffee tables on which to put them on?
Steve is not alone in calling out the burgeoning phenomena of customer behaviour. Only last month Lord Wolfson CEO of Next used almost identical, but possibly less poetic language than Howard, to explain the slump in fashion retail on the high street. His plaintive quote ‘People don’t want to buy more stuff’ was covered very broadly in the media, and not just in the business pages.
Other indicators out there in the markets could be interpreted in much the same way. Take Apple; the champions of aspirational consumerism have not been immune of late. Wall Street experienced a few ripples in their Chai Latte’s when the corporation announced its third consecutive sales decline in October 2016.
While no one is suggesting that Apple is in trouble, it would seem people are becoming more values driven and less materialistic. We know for certain that some audience groups driven by economic circumstances beyond their control are struggling with the idea of not owning anything ever. Millennials have been priced out of the property market; it’s a ladder they may not ever be able to stand at the foot of, never mind raise a foot onto the first rung. We also know high percentages of people will switch brands if there is a disconnect between their values and the actions of the brand.
At the same time purchase behaviour has swung away from commodity. Two very obvious examples spring to mind; music fans buy much less music as a physical product – they stream it from Spotify. Likewise film fans; who wants a DVD when you can stream it under temporary license from a subscription service such as Netflix?
But if people either can’t or don’t want to be rich in the materialistic sense, it would seem they do want to be rich in another way – in experience.
Reverting back to Wolfson’s observation about the performance of retail fashion, he further qualified this in his statement to shareholders: “We believe the numbers demonstrate the continuing trend towards spending on experiences away from things”.
A whole lot of consumer data backs Wolfson up. The predictions vary depending on where and what you read but Mintel’s American Lifestyle study of 2016 showed a significant increase in spend in ‘non-essentials’. Such things as dining out, holidays, shows, gigs, festivals of every hue should perhaps now be deemed as ‘essentials’.
Barclays’ recently released consumer spending report based on the first quarter of 2017 tells much the same story. They cite ‘splashing out’ on the experience economy as a key driver of growth, with spending on entertainment maintaining double digit growth for an 11th consecutive quarter. Meanwhile, visits to pubs and restaurants both rose by +12%. Leisure time with family and friends was referred to as a priority over other types of spending in the first quarter of 2017.
Brands like Secret Cinema and Tough Mudder are properly evolved experience economy businesses. As brands and experiences they are poles apart, but both these, and every other business in the experience 2.0 economy are united by what they sell; connected, communal moments – the connectedness and the community providing all the power in the commercial offer of these brands, and the attraction of such to an audience.
And the brands to watch are the ones that are not visible yet but have invested into the experience economy. What is the next Secret Cinema – where is that going? What might that represent on a global scale? Airbnb is one of the experience economy brands that are constantly evolving. It is trying to evolve to own the notion of experience in a much more holistic way.