First it was the industrial economy. Then, creeping into the 21st century we saw the rise of the service economy. Now, supply chains are being disrupted by the experience economy. Led by Millennials who demand both more customized experiences and more granular visibility into the lifecycle of their purchases, the experience economy is forcing huge changes in the way business is done.
In the early 20th century Ford and other companies pioneered assembly lines, a game-changing manufacturing innovation that made the mass production of identical goods possible. But today’s customers are looking for something a little more unique, and their search for that something has disrupted the entire supply chain. There is a compelling value proposition for companies to meet the needs of the “market of one”—that is, when a customer feels special because they believe a company is trying hard to meet their needs.
Consumers, particularly Millennials, want to feel like individuals rather than mass consumers of assembly-line goods. But it goes deeper than that. The experience economy stems from consumers’ desire to feel closer to the source of their purchases and to feel that they are part of a new, socially responsible generation of shoppers. Think of an artisanal chocolate shop that hosts a chocolate and wine night, where participants can learn first-hand how cacao is sourced in fairly traded South American plantations and converted into bars using sustainable methods. Providing this kind of intimacy to customers depends on providing greater visibility into the entire supply chain. Thus, if you think creating an experience economy happens only at the storefront level, you’re mistaken.
In short, today’s shoppers care about more than price and availability; they want intimacy and the opportunity to be involved in the co-creation of a product.
What it Takes for Today’s Brands to Compete
While experts are heralding the “end of retail,” many businesses are actually opening more physical stores. Why? It’s got a lot to do with the needs of this new experience economy. Ecommerce is on the rise because it offers unprecedented convenience. But this doesn’t mean people want to conduct all of their shopping through the click of a mouse. Rather, they want to touch, photograph, and try things on for size—and still have the option of placing an order online that will arrive on their doorstep in a day. Businesses should creatively mix experience and convenience, all while combining online and offline shopping experiences to offer flexibility. But this will require seamless logistics and informed planning to ensure that stock is in the right place at the right time to meet demand.
IKEA and clothing brand Bonobos are two examples of traditional retailers that cleverly maneuvered their businesses to offer an experiential shopping platform. And the kind of customization and product-interaction they offer isn’t limited to everyday brands. Recently, Barneys in New York held a two-day event called “the Drop,” which featured tattoo artists and piercers, custom sneakers and T-shirt bars, and streetwear brands like Off-White and Fear of God. The event was a huge success, attracting younger shoppers who had never before been to a Barneys location. At the end of two days, the Drop had drawn 12,000 shoppers to the store and increased year-over-year revenue by 30 percent.
Barneys New York CEO said it best in the Wall Street Journal: “We’re in the entertainment business. We’re in the personalization business. We’re in the services business. We’re in the food business. We also know the consumer does want that social connection, and it takes place in actual environments and physical spaces—stores, restaurants, fitting rooms.” This ability to pivot when needed—focusing on catering to the customer’s individual needs rather than trying to sell them a prepackaged product—will be the make-or-break factor for several industries in the coming years.