Perhaps counterintuitive, younger consumers have come to understand that somethings are more important than cost
When was the last time you went into a store and purchased something? Perhaps you were just running into the store to pick up a quick snack. Chances are that prior to even the simplest of shopping decisions, you consulted the internet. Whether shoppers are looking for information on prices, reviews, quality or the general experience, many retailers rely heavily on the expansion of on-demand e-commerce consumption.
By 2020, the retail e-commerce industry in the US is forecasted to jump from a $340 billion to a $485 billion. Innovation and progress in technology have introduced new types of lead generation models and consumer trends, suggesting that more than 50 percent of shopping is now done online (a figure that demonstrates constant growth). Over the course of 2016, we saw the trend lending itself towards an e-commerce boom, and believe that 2017 will be the year where the quality of experiences outweighs simply getting a good value.
Shopping is like Eating: We never stop
Consumption and production are not linear paths but instead act cyclically. As Werner Reinartz from the Marketing Department at the University of Cologne told the Harvard Business Review: “The customer experiences a need, shops to satisfy the need, and then consumes or uses the product purchased (I need shoes, I buy shoes, I wear them).” We know that consumers don’t just buy shoes because they have a hole in their sneakers. If that were the case we would all have one pair of sneakers, one pair of dress shoes, and one pair of sandals. Shopping is based upon the perception of the need, regardless of if the need actually exists.
Millennials prove that the trend is lending itself towards emotional and experiential shopping. Millennials around the globe are said to have an estimated to have $2.45 trillion in spending power. With all of this cash in hand, how are they consuming? By splitting the market into millennials versus non-millennials, we can evaluate the differentiating priorities across demographics. Non-millennial consumers place a higher importance on the value and place that as the top priority. But, in true millennial fashion, in an era of digital consumerism millennials want it all with a good value and an uncompromised experience.
The digital “Silk Road”
If history is any indication of trends to come (as it often is), then we can make several predictions about the modern exchange of goods. Instead of the Silk Road, we have the digital trade route supplying consumers with immediate access to goods and options. The digital route allows 24/7, uninterrupted, and completely customizable consumer experiences.
The future of shopping as an experience
The human demand for experience-based consumption, combined with available technology and supported by millennial preferences will shape the future of the online shopping experience. We can look at the future of shopping experiences based on the weight millennials place on experiences and divide the new categories for retail as four different experiences: Minimal, Expected, Full, and Unexpected.
In this category, consumers want to find or order online basic goods that have standardized quality and don’t necessarily require any special purchase experience. The main decision making factor is cost and it is the biggest category among consumers. According to 2016 PWC Retail Report, if we want to look into the future of shopping we can observe trends from China, where according to the aforementioned Retail Report, 60% of consumers shop online because prices are better and most people have smartphones and internet access. Companies like Yelp and Amazon are representative examples of this market. They both provide instant basic results that are easy to consume. In the future, features like instant purchasing, automatic purchasing, and subscription-based purchasing are likely to be added too.
Consumers expect a familiar experience, which they experienced before and want to consume exactly in the same way in terms of product, service, or value. This category has a bigger yet more fragmented market, where according to a PWC report, 32% of consumers “trust the brand”, 25% “like the return policy”, and of course 24% appreciate “fast and reliable delivery.”
Companies like Forever 21, H&M, Target, and CVS all offer consistent experiences in-store and are building from their current customer base to enter the online segment strongly. Aesthetically the brick-and-mortar store and online store are similar, and consumers are easily able to transition between both experiences. Consumers are able to buy items online and return them in store. The barrier for this category is to figure out logistics and delivery. For store owners, and consumers the expected experience is the shopping experience to most improve with time.
Experiencing something in full is challenging to deliver. Online shopping as it stands, cannot create the same feel of shopping in a private boutique. One way to go online with this principle is to have a great in-person shop that also offers delivery, allow for scalability and allow users quick and easy customization. Another way is the Trunk Club approach, where consumers are offered the experience of having a personal shopper and stylist, all from the comfort of their phone or computer packaged with easy delivery and returns. Interestingly, they also maintain “clubhouses” in major cities like DC, NYC, and Boston where customers can come in and try items out in person.
This category is more appropriately a forecast of the future of shopping because it is still in flux for online shopping. As with all consumer conscious endeavors, a proof of concept is necessary. With consumers, experiences need to be felt first to be desired most and so this market’s proof of concept has yet to be tested. Compared to the Minimal Experience, let’s say it is a book delivery through Amazon. In this instance, the unexpected counterpart to that would be a subscription based service where authors like J.K. Rowling send consumers personalized reading suggestions. Another way to look at this experience is examining it as a high-end subscription service. In the search for new experiences, we prepare for the unexpected shopping experience. In this category, which is relatively smaller and growing rapidly, 22% of consumers are inspired by the offered service and or convinced by online reviews. Consumers demand adequate sales and support (25%), like you would expect from shopping at the Apple Store.
Today the Minimal Experience shopping category is largest in dollar amount and that’s due to the fact that companies like Costco and Amazon work hard to bring business online, yet they work on experience which is efficient rather than exciting, especially to the millennial consumer. This type of experience seems to belong to the information age, while we surely move to the experience age.
So what’s next?
Given the four experiences we have identified, it’s not certain if one or two will merge, or if new experiences will emerge. What we do know is that the future of retail is in the hands of consumers and entrepreneurs. The trends have lent themselves towards instant access and easy user experiences. Look at what Black Friday used to be, and the power the brick-and-mortar store had on consumer trends. As we continuously move deeper into a digital age Black Friday is quickly being beaten out by the new Cyber Monday.
According to a recent poll, 64% of American consumers own a smartphone and 80% shop from their mobile device. If retailers want to keep up with millennials this year, it starts with mobile-friendly content and a total reinvention of the customer experience.