"Experiential retail" is a term you may have seen popping up more often in the retail industry lately. An increasing number of major brands are working it into their strategies, some in a big way. But what is experiential retail, and what events in the market are driving its growth?
Over the past several years, an increasing number of people have begun choosing online over in-person shopping. This is a trend that real estate investors became concerned about well before the coronavirus pandemic took it into hyperdrive.
And it makes sense. Online retail means a different customer experience: not having to get dressed and ready, fight traffic and crowds, wait in line to check out, or fight traffic again to get home. It also tends to offer a much wider selection of goods than what any physical retailer could reasonably carry.
To compete with that allure, a growing number of retailers are working to elevate the store experience of shopping with them so it's more memorable. Let's explore this concept of experiential retail, check out a few retail brands that have done it or are offering it right now, and see what's in it for them.
How does experiential retail work?
For many a shopper, going shopping isn't just about acquiring goods. Sometimes it's about the retail experience, too. That might mean grabbing coffee with friends or taking the family to breakfast or lunch before hitting a mall or shopping centers. Helping one another pick out clothing, home items, sporting goods, or any variety of items can be a fun way to spend a day.
By becoming an experiential retailer, a physical store takes this concept of shopping to the next level. They might offer fun ways to use the products in store, professionals who can show you how to use the products better, or special events you can learn about by interacting with the brand on social media.
The idea is to offer the customer an immersive experience that can't be duplicated online. With experiential retail, these stores are creating environments and experiences that educate and entertain the customer while making them feel more a part of the brand.
What type of space is required for experiential retail?
Athletics retailer Dick's Sporting Goods (NYSE: DKS) has gone big with the experiential retail store strategy. Its experiential concept, House of Sport, debuted in a Rochester, New York, suburb back in April. Offerings include a 17,000-square-foot turf field and running track, a batting cage, golf ball hitting bays and a putting green, and a rock-climbing wall.
And a recent report from retail analytics firm Placer.ai indicates the experiment has been a tremendous success, with weekly visits to the experiential store over 93% higher than those seen at nearby "regular" Dick's stores. Implementing experiential strategies like this can not only boost sales but raise brand awareness and loyalty, too.
But clearly, creating that type of consumer experience requires a great deal of outdoor space, something the average retail store doesn't have. Fortunately, some stores aren't letting that stop them from finding ways to take advantage of the retail space they do have available. It's also worth noting that not all retail experiences have to be available all the time.
For example, IKEA incorporated social media into an experiential retail event when the retailer held a Facebook competition with a unique prize: 100 winners were invited to spend the night in an IKEA warehouse, where they got to select their mattresses and bedding and try to get a good night's rest with the help of a sleep expert.
And TOMS Shoes didn't need much extra space at all for the virtual reality (VR) campaign the retailer ran in 2015. At that time, TOMS gave a pair of shoes to a child in need for every pair purchased. The VR campaign the company temporarily rolled out to over 30 of its stores let customers virtually experience what it would be like to arrive at a remote Peruvian village, participate in the program, and even hear from some of the people living there.
How does experiential retail benefit retailers?
Experiential retail finally gives physical stores an edge over online shopping. Many of today's shoppers are strapped for time right now, and shopping online in your PJs is just so easy. Offering not only goods for sale but also entertainment, education on how to best use the products, and real interaction with the brand is a fantastic way to compete with that draw.
They say money can't buy happiness. But research suggests that while stuff might not make people happy, spending money on experiences can. And after all this retail excitement, clicking "add to cart" when you could be having a unique experience might begin to feel a bit hollow. With experiential retail, a fun time can be had by all -- even investors in retail.