Experiential commerce: experience before price
Price has long been the most important differentiator in retail, but that is changing.
Both online and offline retailers have been under high pressure for many years now. The reasons for this are manifold, but from the retailer perspective one of the main culprits is clearly identifiable: Amazon. Brick-and-mortar shops generally complain of migration to e-commerce, while e-commerce companies complain of Jeff Bezos’ gigantic platform. These issues cannot be denied and yet complaining rarely helps and, at the same time, many retailers often took the easy road in the past by focusing on price.
Here, too, the impetus came from Amazon, as Jeff Bezos, with his strategy of low prices, ensured the online marketplace’s breakthrough. Of course, pricing was always an important instrument for customer acquisition, but only through the flourishing online trade did this morph into supra-regional competition for the lowest price. Customers suddenly no longer had to run from store to store to compare prices, because with just one click they were already at the next online shop—not just regionally or nationally, but globally.
Retailers have to distinguish themselves
For a long time, the price model for differentiation in the market seemed to have no alternative, but its dangers were all too obvious. Excessive price reductions reduce margins and only allow for profits if a large enough volume is sold. This in turn requires investment in growth, which can hardly be achieved with lower profits. Amazon was also only able to make greater profits in the first quarter of 2018, which are also largely attributable to its cloud services. For the broad mass of retailers, however, the price model can hardly be successful and has become obsolete as the sole distinguishing feature.
But what is the alternative? A promising possibility is so-called experiential commerce. This new concept not only focuses on products and prices, but on customer experiences. The motto here is, “It’s not just about selling products, but experiences!”. This all sounds good, but what does it mean in concrete terms? What makes shopping in a store an experience for the customer?
Five approaches to experiential commerce
Context & personalization
In what context does a customer relate to a brand and its products? In which concrete areas can a product enrich or even change the customer’s life? The many different points of contact with customers now provide brands the opportunity to answer these questions, even in brick-and-mortar retail outlets. However, personalization must always be aligned with the wishes, requirements and needs of the customer. By comparison, the price model focuses solely on sales.
Touch, try on, try out: experiences arise through direct interactions with a product. How does it feel to use, what can I do with it, how does it help me? There are numerous products whose full value is only revealed with the answers to these questions. VR and AR applications further expand the spectrum by way of real-time product personalization, for example.
Shopping can be highly emotional if customers are provided the space and incentives to express their feelings. This is one of the great opportunities for retail stores, but trained personnel is rare and consultants who see themselves not only as sellers are the unicorns of the industry. Customers who have had emotional experiences in a shop are very likely to come back and talk about them to their circle of friends.
Ratings instead of sales commissions
Not every customer who enters a store or visits a web shop has a concrete intent to make a purchase. If they are then approached by salespeople who have to earn a large part of their income through commissions, expectations can collide and make it difficult to develop a good relationship. We have known for a long time that customer satisfaction is an important lever for sales. So why doesn’t over-the-counter retail consistently rely on ratings of its salespeople for commissions?
Inspire and surprise
To sell customers exactly what they wanted from the outset is not much of a skill. Seduction through inspiration and surprise must be the goal. So why not offer a changing room for a virtual fitting and inspire them with recommendations? Or who wouldn’t be surprised by a screen disguised as a mirror that shows passing customers in a new look?
The bottom line: Retail has to reinvent itself
There are certainly other approaches to experimental commerce and the ones presented here can be easily used in combination. Whatever the shopping experience is at the end of the day, success is only secondarily determined by price. This not only requires a new store concept, but also a new way of looking at the customer. They don’t just want to exchange products for money, but experience something!