by Mercedes Bent of Lightspeed Venture Partners
“Pics or it didn’t happen” is my generation’s version of “if a tree falls in a forest and no one hears it, does it make a sound?” I have spent way too much time fretting over the caption that would just perfectly complement the memory I wanted to show off (if you’ve been there, you’ve been there).
“The Experience Economy” was coined in 1998 by Pine and Gilmore to describe how consumer’s understanding of product value had evolved over time: the memory of an experience was now the product itself. They describe four key elements of creating an experience:
Millennials championed this new experiential reality into existence with our in-your-face, FOMO is real, look-how-good-of-a-time-I’m-having demeanors. A study by Harris Group found that 72 percent of millennials prefer spending money on experiences over traditional goods and a McKinsey study showed that consumers were shifting their spending from goods to experiences at a breakneck 3.9x rate.
When societal norms change like this, new types of businesses get built. I’ve been paying close attention. Here’s my take on the space:
Trends Shaping this Decade’s Experience Economy
- Social is the new Search: Consumers now discover and search for experiences on Instagram. 89% of Instagram users have bought something that they first saw on Instagram and 61% of brands say social media is their top acquisition channel.
- URL (online) isn’t enough. IRL (In Real Life) is bouncing back: People are seeking more IRL connectedness. Much has been written about how social media and the iPhone’s release ushered in a new era of loneliness; more teens report feeling lonely now than in the two decades prior. Shopping malls’ decline also left a void for unstructured “third space” hang outs. Between 2000 and 2015, the number of teens who met up with friends frequently dropped by 40%.
- Retail needs a Savior: While not all experience economy companies need physical space, many are taking advantage of the fact that department store sales have stagnated & mall vacancies increased. Since the last recession department store sales have been flat while e-commerce sales increased 3x. This trend isn’t stopping: e-commerce’s share of sales is expected to double by 2025. While all retail vacancies increased during the recession, most recovered. Malls did not. “Experiential Retail” has popped up to describe what some are calling a survival strategy for retail.
Let me summarize this with a memory. When I was in high school in Virginia, I’d go to the Fair Oaks mall to hang out. We told each other that we were going shopping, but we didn’t actually buy that much. Mostly Coldstones and Claire’s earrings! But being with my friends in the same space, at the same time, is what built both relationships and memories. Today, malls are dying and kids aren’t going there to hang. That’s left a gaping void in togetherness, an itch that needs to be scratched in some other way.
As an adult, I’ve found more excuses to hang with friends. Sometimes, it’s getting our nails done. Or hot yoga. Recently, it’s been going to SoulCycle, Barry’s, or a dance class.