Spending On Thrills: Aussies' Retail Revelry
In a world where purse strings are tightening, global conflicts are sparking tensions, and consumers are yearning for happiness in the aftermath of a pandemic, the retail landscape has become a battlefield for joy. Bucking the trend of materialism, studies reveal that consumers find greater happiness in experiential purchases over material ones, regardless of the cost. This clash of essentials and experiences unveils a canvas where consumers, desperate for happiness, seek to find moments that transcend the material and resonate with the soul.
Even before the pandemic, Aussies were swapping possessions for experiences, with a 2018 report by NAB Group Economics revealing a surge in spending on dining out, movies, and holidays. Fast forward to COVID, and the abrupt halt to these experiences only fuelled the desire for shared moments. Now, despite the economic pinch, consumers are eager to reignite their pursuit of meaningful adventures. The appetite for vibrant and enriching experiences remains undeterred, propelling retailers to find innovative solutions to meet these evolving expectations. In this dynamic retail landscape, the challenge and opportunity for businesses lie in crafting an immersive shopping experience that transcends mere transactions, creating moments worth sharing, reminiscing, and reliving. The stage is set for retailers to not just meet but exceed the revived expectations of a consumer base hungry for the vibrancy that only shared experiences can bring.
The recent CommBank iQ Cost of Living Insights Report serves as an exclusive backstage pass to this retail spectacle, unveiling how Aussies are reshaping their spending habits amidst rising living costs. According to the report, 25-29 year-olds have been the hardest hit with a 5.1% decline in their total spending, standing out as the only age group to decrease both discretionary and essential spending. Despite this, those in their twenties display a remarkable resilience, allocating a significant portion of their budget to entertainment experiences, demonstrating a 13% increase. Wade Tubman, the Head of Innovation and Analytics at CommBank iQ, notes, "Leaving room in the budget for experiences is a continuing trend. However, they are having to reduce spending in other areas."
Furthermore, the "Barbenheimer" effect led by Australians under 30 showcasing a 31% surge in cinema purchases, coupled with an 18% increase in spending on ticketing services for concerts and sports, further underlines the unwavering commitment of younger generations to prioritise experiences, even in the face of financial challenges. This resilient spending pattern among the hardest-hit age group illuminates the enduring appeal of shared moments and the integral role experiences play in shaping the modern consumer landscape.
Image courtesy HDQ Walls
However, whilst Zoomers and Millennials may be leading the charge in the experience-first trend, they've got company. The spend by Baby Boomers is booming, and at the top of their indulgences are travel (up 17%) and eating out (up 11%). It's a convergence of generational vibes, where the thrill of experiences unites young and seasoned shoppers alike.
So how can businesses capitalise on this trend?
For some, experiences are already inherently ingrained in their business model, such as Red Balloon, an experience gifting company. It is expected that these companies will do relatively well over the festive period even in a fiscally challenging environment. Even though Aussies gift budgets have decreased for the second year in a row, from $430 in 2021, $424 in 2022 to $388 in 2023, gift cards remain the undisputed champions with 47% of Australians choosing to gift, and 44% wanting to receive them (You can read Pureprofile's report here). Therefore, experience gift cards are expected to still be a popular choice amongst consumers. One reason for this is that experiences are more than just purchases: they're shareable stories, making them the social media currency of younger generations. A hike or a cooking class becomes a virtual feast for the senses, more engaging than flaunting a new TV on Instagram. For experience-centric businesses, the spotlight should therefore shift towards championing the share-ability of these adventures. Facilitating customers in curating content that not only captures attention but also propels sales is the name of the game. It's not just a sale; it's a strategic blockbuster in the making. Lights, camera, share – because in the business of experiences, every transaction is a story waiting to unfold.
There is also an opportunity for these companies to engage new target audiences, such as the Boomers, who are also embracing the experiential shift whilst also having deeper pockets than younger generations when it comes to discretionary spend. Boomers are spending more per capita than the year prior, even ahead of CPI. Whilst this generation didn’t grow up amongst the experience economy, they are showing similar trends in gifting and experiential preferences. Companies that manage to target this untapped potential over the next 5+ years could help buffer against any potential decline due to the tightening budgets of hard-hit younger generations.
Image courtesy of Commbank iQ Cost of Living Insights Report
For more traditional players, retailers can transform their physical spaces into experiential hubs. Think interactive displays, in-store events, and personalised customer interactions that go beyond the typical sales pitch. These experiences not only attract foot traffic but also foster a sense of community and brand loyalty. The digital realm also offers boundless opportunities for retailers to engage consumers in novel ways. Virtual events, live streams, and interactive campaigns can all contribute to creating a sense of participation and immersion, even in the online space.
General Monster has integrated experiences into their store designs to attract customers.
Image courtesy of Flaunt
For retailers, the challenge and opportunity lie in crafting a shopping experience that transcends the transaction, creating moments worth sharing, reminiscing, and reliving. The retail stage is alive with the thrill of experiences, and those who can orchestrate this symphony are poised for a standing ovation in the ever-evolving landscape of Aussie shopping.