HOW EXPERIENTIAL COMMERCE IS TRANSFORMING SHOPPING

Samsung's Experiential Store

20 years ago we could buy only what was available in a store located within the driving distance from us. Now we can buy anything from anywhere and there is no shortage of products. We can buy whatever we want, and it will even be delivered to us within the next 5 days and, often, within 1 or 2 days. So if anything we want is at our fingertips just one click away, what will be special about shopping and how will the companies differentiate themselves in the future? Even more importantly, what kind of connection will customers have with the brands and the companies which will entice them to buy from these specific businesses?

Offline/Online Retail Landscape

• 8,053 retail stores were closed in 2017 (source). Though some call the current state of events “retail apocalypse”, Forbes claims there were more retail stores opening than closing in 2017. Those closing are big department stores like Macy’s and those opening are mostly convenience and discount stores, which, of course, target a different type of consumers (source). Many of the store closures are attributed to the growth of e-commerce sales and the offline retail industry is losing customers to e-commerce businesses.
• Within e-commerce, Amazon has 43.5% of all US e-commerce sales in 2017 (source).
• More than three in four millennials would prefer to spend money on an experience or an event rather than on buying things. Today’s consumers want to own things less than experience them (source).
• Personalization is one of the key trends in 2018 (read more about it here).

Experiential Commerce Addresses New Trends in (Online/Offline) Retail Shopping

Crystal Maze Experience in London

I think we are far away from a retail apocalypse but to keep up with changing customer needs, the retail industry must change profoundly. More and more companies are moving from the concept of selling things to the concept of “selling“ experiences (and, by extension, things) - call it experiential commerce. Stores should start engaging customers on a totally different level. Imagine an outdoor gear store where you can come in and paddle a canoe, hop in a rain and wind chamber and climb the walls. Globetrotter stores in Germany offer exactly this type of customer engagement (source). 

Or imagine a fashion store full of VR/AR tools to help you see how you would look like wearing one or another set of clothes. Warby Parker’s AR tool, for instance, allows you to see how your face will look like with various types of glasses. By implementing these concepts focused on experiences rather than on selling things, the retail stores become the experience distribution centers, and such approach should presumably appeal to the demanding millennial customer. All the stuff people want to buy can be shipped to them later – today or tomorrow, - but the connection that consumers build with the store, the brand or the company is much more valuable than a one-time sale. The customer will be coming back if she likes the experience.
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It’s hard for e-commerce companies to achieve this type of connection with the customer because their connection is not emotional, it’s not physical (aside from nice packaging or some story telling techniques used on the website). And it’s harder to establish such connection when you don’t have a physical point of contact. Maybe that’s why pure e-commerce players like Amazon, Alibaba, Warby Parker, Bonobos, Harry’s, Modcloth decided to open physical stores or invest in companies which have offline presence. All of this gives rise to the so called O2O commerce (online-to-offline), which seems to become another important trend to watch. So even though e-commerce is growing faster than expected and entices customers away from offline retailers, offline industry still has a pretty good chance to succeed and beat e-commerce competition if they adapt and change quickly. 

Amazon vs. Walmart

Take Amazon and Walmart, for example. Both are large companies with their brands well-known in the US. Walmart is still in the early stages of its e-commerce growth, so the good news is that it has huge potential. Walmart’s e-commerce sales were $11.5 billion (with $486 billion total revenue), a mere fraction of Amazon's revenue of $178 billion in 2017.

Amazon vs. Walmart

Amazon has been perfecting e-commerce for the past 24 years and, to a large extent, shaped the global e-commerce industry. Will Walmart be able to succeed by just trying to catch up with Amazon in the online space? I think it’s unlikely, but what it can do to successfully compete against Amazon is to use its offline presence to its huge advantage and potentially convert its offline stores into experience distribution centers while giving customers an opportunity to order both online and offline. Also, Walmart has perfected (and pioneered many concepts in) its supply chain, so it will be difficult for Amazon to catch up with Walmart in the offline world if it chose to do just that. Basically, the above comes down to the following:
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• Amazon’s strength is its e-commerce expertise and technology. Amazon is looking to gain market share in the offline world.
• Walmart’s strength is its offline presence and supply chain. Walmart is looking to gain market share in the online world.
• Both have resources to succeed in their strategies. 

Even with its 11,500 stores in 28 countries, Walmart, however, is still limited geographically more than Amazon because its business is mostly offline. Walmart’s acquisition of Jet.com gives it a chance to expand and diversify globally. With Amazon moving from online to offline and with Walmart moving from offline to online, we will see more direct competition between these two dominant players. Hence, we will also see more convergence between offline and online concepts. It would be interesting to see what will happen if (or when?) Walmart transforms its stores into experience distribution centers, creates exceptional customer service (the cost of doing this is negligible as compared to Amazon’s getting into the offline business) and integrates with its e-commerce arm Jet.com. It seems that doing so could give a strong competitive edge to Walmart in the e-commerce battle field because Amazon doesn’t have the advantage of physical connection with the consumer. An interesting article about strategies of both companies was posted here.

Experiential Commerce’s Success Components

Globetrotter's Experiential Store in Germany

In addition to the Experience itself, companies must think about a number of components which can make experiential commerce approach more successful for them. Stores come up with very creative approaches to attract and retain customers but the basic ingredients of success stay the same. 

1. Context. The concept of experiential commerce in offline stores assumes that there are multiple physical touchpoints with the customers, so the store has many opportunities to show the customer how one or another product can enhance, improve or change the customer’s life. ​In the online business this customer experience can be enriched by implementing VR/AR tools (virtual dressing rooms, technology that shows you how a furniture set would look in your room, etc.) Placing a new product in the context of a customer’s lifestyle can help the customer make a purchasing decision.
2. Immersion. The best way to show a customer how a new product can fit in his lifestyle is to allow the customer to feel it. In the VR industry it’s all about the immersive feeling that you experience when putting on the VR headset. If a store is selling children toys, let the customer’s kids play with them. What can be a better demonstration of the product than actually using it! American Girl recently opened a new 40,000 square foot store in NYC with a number of new features. Top among them is the all-new American Girl Salon, where girls can join their American Girl dolls in getting matching hairstyles, mini manicures, and even ear-piercing (source).
3. Emotional connection. When a person is immersed in the store experience, an emotional connection is being built. This connection is what will incentivize the customer to come back and to tell their friends about the experience. This emotional connection, though, is impossible without stellar customer service.
4. No sales pitch. Many of the potential customers don’t come back to a store if the sales associates had been too pushy. Experiential commerce can help stores build strong emotional connection, increase loyalty and engagement but a pushy sales associate can break it all in one second.
5. Personalization. Customers are increasingly looking for personalized shopping experiences both online and offline. Experiential commerce is a perfect way to introduce such unique experience. Customer segmentation, behavior analysis tools and sophisticated software systems made it possible to source, store and immediately retrieve customer information when the customer enters the website or an offline store. Some personalization ideas can be very simple like printing the customer name on the product (see Coca-Cola’s “Share a Coke” campaign in Australia), some – more sophisticated, such as retrieving customer purchasing record via a mobile app which is open on his phone when he physically walks in a showroom.
6. Inspiration. Inspired customer is a happy customer. Saks inspires customers by creating unique experiences for them to actually feel how the company can change their lives. In its New York store Saks created a wellness section which is dedicated to classes and services and includes salt therapy rooms and meditation classes.

Though there are still not many people talking about it, experiential commerce is becoming a visible trend among offline retail stores. According to PSFK’s Future of Retail 2018 report from November 2017, 55% of the 400 retail executives surveyed will spend part of their marketing budgets on in-store experiences by 2020. E-commerce companies are also experimenting with a number of tools and technological innovations to create unique customer experiences. Convergence of offline and online sales channels will become an important consideration in the companies’ strategies, while selling things will become a by-product, a logical extension of fully immersive, emotional and personalized experience a customer will have with the brand or the company (source).
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That said, I went to Target, Modell’s, Home Depot, Staples, TJ Max and Macy’s in New York just to see if there have been any changes in the shopping experience towards experiential commerce or customer personalization. And I didn’t see any. Not much has changed as compared to what I saw 10 years ago. These companies are still not using tools or techniques to learn more about their customers’ preferences or desires, so hopefully we will see and feel these changes in the near future as they enhance our lives and enrich our life experiences.