How Retail Survives in the Experience Economy


Brick-and-mortar retailers need an edge. According to recent research, 67 percent of Millennials and 56 percent of Gen X consumers prefer to shop online. The reason is convenience and price. Given those two factors, brick-and-mortar outlets cannot hope to compete against online retailers. It’s not a fair fight.

The answer, then, is not to compete with ecommerce, it is to differentiate from it. Brick-and-mortar retailers need to lean into their strengths, specifically the “bricks” and “mortar.” Until recently, this was seen as a weakness, with storefronts dotting the landscape like dinosaurs while the more agile ecommerce flew through the clouds. However, that is no longer the case. Today, successful retailers can utilize their physical environment to transform the act of visiting a store into an experience.

A recent study found that 74 percent of all American consumers prefer to spend money on experiences rather than material goods. Brick-and-mortar retailers need to capitalize on this trend and convert stores into more than just a location to display merchandise. In essence, they need to turn the experience of shopping into a commodity. This is how retail survives in the “experience economy.”

What is the Experience Economy?

The experience economy was introduced by Joseph Pine and James Gilmore in the Harvard Business Review article, “Welcome to the Experience Economy.” It refers to businesses evolving from selling goods to selling experiences.


The article uses IBM as an example: “In its heyday in the 1960s and 1970s, IBM’s slogan was “IBM Means Service,” and the computer manufacturer indeed lavished services—for free—on any company that would buy its hardware goods. It planned facilities, programmed code, integrated other companies’ equipment, and repaired its own machines; its service offerings overwhelmed the competition.”

A government ruling made IBM unbundle its hardware and software. However, the article states that this move was inevitable because the services became the company’s most valuable offering.

“The company no longer gives away its services to sell its goods. In fact, the deal is reversed: the company will buy its clients’ hardware if they’ll contract with Global Services to manage their information systems. IBM still manufactures computers, but now it’s in the business of providing services.”

Research from Cornell looked at the impact of the experience economy on consumers. The study found that experiences are more psychologically rewarding than material purchases. Not only do people enjoy an experience while it is occurring, but they also enjoy the anticipation of the event and the memories it creates. The study interviewed people waiting in line and found that those who were waiting for an experience were happier and better behaved than those waiting to purchase a material good. The belief is that, because an experience is something that’s enjoyed communally, the wait is also perceived as a communal event as opposed to a purchase, which is something that people do just for themselves.

Brick-and-Mortar Retail in the Experience Economy

So, the Cornell research seems like yet another ill omen for brick-and-mortar retailers. Except that people still buy goods. By the end of 2019, global retail sales are expected to top $26.3 trillion, with the U.S. accounting for $2.6 trillion of that amount.

The real issue facing brick-and-mortar is how to get shoppers through the doors and keep them there. Time is money, quite literally in the experience economy. When someone is looking to buy an item, they want to spend a little time as possible making the purchase. However, when someone is enjoying an experience, they want that time to last as long as possible. The longer you can encourage people to spend in your store, the better chance you have a making a sale (or, at least, earning some brand loyalty). Your sales revenue and brand recognition depend on the experiences you create.

For example, the San Francisco-based menswear outlet Wingtip Club opened its first store in 2008. By 2012, the brand had moved locations to a historic, multi-level building and expanded in an interesting way. The store is located on the ground level and is open to the public. It sells designer-label apparel and accessories and makes space to other like-minded brands (essentially, in-store pop-up shops). Visitors can also sit in the barber chair for a professional shave or head downstairs to have a suit tailored.

Photo Credit: Wingtip Club website

Photo Credit: Wingtip Club website

Members, however, can head upstairs. Yes, members. For an initial fee admission fee of at least $1,000 (there are multiple membership levels that regulate how often someone can visit) and monthly three-figure dues, people can gain access to the private club located on the top two floors of the building. The club features a large, mahogany bar with an extensive whiskey selection, multiple conference and meeting rooms (complete with fully stocked bar carts), a golf simulator, and rooftop lounge (with heated seats because…San Francisco). Members also receive a 10 percent discount at the store.

“Retail is changing fast. Amazon is eating people’s lunch,” Ami Arad, the Founder and CEO of Wingtip Club, said to Business Insider. “If you want to survive, you better have something that Amazon can’t copy or do cheaper.”

Wingtip Club is an example of a small but growing trend of retail locations charging admission fees to enter a store. Take Ziferblat, a Russian chain that recently opened its first London location. Ziferblat, like Starbucks or any modern coffee shop, offers food in addition to the coffee, tea, and specialty drinks it serves. The only difference is that those items are free. It’s the spaces to sit, relax, and work that cost money. When someone walks through the door, the first thing they do is grab an alarm clock and start the timer because, at Ziferblat, you pay for the time spent in the location. The cost is eight pence per minute, which is about 12 cents in U.S. currency. While inside, the snacks are complimentary: you can grab your own coffee, order a specialty drink,  or head into the kitchen and cobble together some food. Then hop on the WIFI and get to work. When finished, grab your alarm clock, head to the cashier, and “clock out.”

Could your business charge an admission fee? You may not be able to open a private club or charge for time spent at your location, but what about classes? Are there educational opportunities you could provide to your shoppers? What sort of services could you offer that people would find valuable?

How else could you make shopping at your store an event? Is there technology you could utilize to make shopping more pleasurable or fun?


For example, unless you are a frequent visitor, finding anything at a big box hardware store is an infuriating experience that’s rivaled only by trying to find anyone to help you. Lowes recently confronted this situation by hiring R2-D2. Actually, the robot’s name is NAVii, and although it doesn’t look as cool as R2-D2, it is easier to communicate with because it can respond in English, Spanish, and other languages. NAVii can answer customer questions about item locations and even lead them to the exact spot (using tech similar to a self-driving car). While journeying through the store, NAVii presents shoppers with special offers on a second screen and scans shelves sending up-to-date inventory information to store associates.

Providing shoppers with experiences will help brick-and-mortar retailers create deeper connections, strengthen brand loyalty, and combat the continuing encroachment of ecommerce.

Disclaimer: We’re fans of all the innovative and interesting activations that occur across the world, and we like to keep our readers informed as well. This post features the efforts of an activation that is not our own. We applaud their work, and do not wish to appear to take credit.