Is experiential gift giving a threat to retail?

Discussion
Dec 18, 2015

According to the NRF’s final consumer holiday spending survey of the season, about 22 percent of consumers are planning to give an experience-type gift and 37 percent would like to receive one. However, those numbers jump significantly for Millennials.

More than one-third of both 18-24 (36 percent) and 25-34 year olds (35 percent) are planning to give a gift of experience, and half say they would like to receive one (55 percent of 18-24, 50 percent of 25-34 year olds.) Two in five (43 percent) 35-44 year olds would like to receive an experience gift.

Some examples of such gifts included tickets to a sporting event, cheese of the month club, gym membership, spa service, art/learning classes, or an adventure outing like whitewater rafting or a hot air balloon ride. Still, the survey showed that many had already made traditional purchases.

"Consumers don’t have to go far to find something perfect for the foodie, fashionista, thrill-seeker or sports enthusiast in their lives," said Pam Goodfellow, principal analyst at Prosper, which conducted the survey, in a statement. "With retailers quickly getting in on this trend by offering their customers ‘bundles’ for the perfect experience, it really is a win-win for consumers and retail companies this year to tout these unique gift ideas."

[Image: REI]





SAP at NRF




In its 2015 holiday survey, PWC found Millennials and "selectionists" (household earning more than $50,000) were driving a growing trend toward experiential gifts, such as travel and entertainment. Overall, it found experiential gifts would account for 12 percent of holiday spending versus physical gifts (68 percent) and gift cards (20 percent).

Many websites offer a range of experiential gifts. While some stores offer cooking classes and REI and Cabela’s offer outdoor adventures, most don’t sell experiential gift packages.

New research from Washington University in St. Louis and Cornell University finds that experiential gifts can be much more meaningful. But physical ones are often given, according to a press release, "to avoid giving poorly matched gifts to socially distant recipients, leading to less happy consumers in the end."

Do you see experiential gift giving taking an ever-larger amount of dollars typically spent on traditional holiday gifts? Are retailers well suited to sell experiential gifts?

Braintrust
"When quizzing my grandchildren (ages 11, 10, 7 and 7) on what were the best Christmas presents they got last year, it was not the toys, the electronics or the games, it was the experiences."
"Sucharita Mulpuru at Forrester has done a great job documenting the long-term, secular decline in share of wallet for traditional retail goods."
"The real losers here are department stores. For everyone else, this may look like a threat to traditional retailers, but it could also be an opportunity for partnerships that can drive sales. If you can’t beat ’em, join ’em."

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12 Comments on "Is experiential gift giving a threat to retail?"

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J. Kent Smith
BrainTrust

The shift away from merchandise to experiences was well noted prior to the crash in 2008, at which time the trend appears to have taken a hit for economic reasons. But yes, amongst important demographics, experiences are a compelling gift. The challenge experiences have is location: it’s easy to ship a product from a far-flung location, a lot easier (and cheaper) than it is to ship a person. The phenomena is real, though. The question is, how can retail get a piece of it by linking experiences to merchandise and vice versa? It’s an extreme example but I recall Brumos Porsche giving buyers a track day with Hurley Haywood. What are wider appeal, more practical examples?

Dick Seesel
BrainTrust

For retailers like REI and Cabela’s, offering adventure trips is true to the brand — and those purchasers will probably buy some supplies while they’re at it. Likewise for stores like Sur La Table, which surely sells kitchen equipment to shoppers who receive gift certificates good toward cooking lessons. It would be tougher — but not impossible — for a broadlines merchant like Macy’s or Kohl’s to offer travel packages, although Costco has certainly figured it out.

As to the broader question of “share of giving?” I would say absolutely, based on our evolving pattern of giving to our own Millennial children. The gift might be a restaurant e-card or an airline credit, at least as often as it might be a retail gift certificate or an actual item of clothing. I’m sure we’re not alone, and our children’s Hanukkah gift back to us also fell into the “experience” category.

Richard J. George, Ph.D.
BrainTrust

Yes, this concept will grow. No, at this time most retailers are still focusing on physical products to the exclusion of experiential gifts. As noted, the Millennials will continue to be a leading force in this endeavor. This is consistent with my ongoing research which indicates that this generation will be a different and leading force in terms of all types and forms of shopping going forward.

Jonathan Hinz
BrainTrust

Funny that my wife and I just switched from traditional holiday gifts to experiential giving this year. Here’s some insights into why we made the switch and how it applies to Millennial spending.

At this stage in our lives we can buy the consumer goods that we want, so traditional giving has become much harder because if we wanted the latest gadget, we’d have already bought it ourselves. There’s a similar theme here with Millennials. Their spending power is at a ridiculous high and their ability to buy what they “want” is much easier for them than it was for previous generations. Therefore providing the need for more lasting gratification than traditional gift giving.

Current e-retail models don’t support this trend, but specialty websites like Vimbly have recently made great strides in offering these services to consumers. In order for retailers to be successful here they need to partner with companies and offer bundles of traditional and experiential gifts (e.g., a new down jacket plus a walking tour of Central Park).

Gene Detroyer
BrainTrust

When quizzing my grandchildren (ages 11, 10, 7 and 7) on what were the best Christmas presents they got last year, it was not the toys, the electronics or the games, it was the experiences. For the older ones, a basketball game at the Barclay Center; for the youngers, the superhero exhibit at the Discovery Center. If they are realizing that now, what will the future bring?

In my letter to Santa, for my wife and me, a staycation right here in NYC.

Kim Garretson
Guest
Kim Garretson
1 year 6 months ago

Not mentioned in the article is the Internet of Things, which of course combines physical objects (like merchandise bought in-store/online) with experiences triggered by the object and its “smarts,” I predict we will see some very clever combinations of these two aspects of a gift upcoming. Here is an article about this related to experiential marketing, but it’s not a hard leap to imagine gifts.

Jonathan Marek
Guest

Maybe … but I’d love to see more experiential gifts that are presented in physical retail stores. Lots of retailers have sold services in stores at great profits for decades. This could be an opportunity to extend that trend, as physical retailers have the advantage of being able to create cool physical in-store experiences. This is a use of the showrooming phenomenon that could actually help the brick and mortar retailers.

Craig Sundstrom
Guest

Without comparative numbers (to prior years), the percentages are meaningless. I would have to think tickets and vacation packages have always been given, and of course the usual caution needs to be exercised making cross generational comparisons (i.e. confusing societal changes with aging effects).

But even if worse is coming to worst, so to speak, many retailers would still be able to piggyback off of the “experiences”…they usually involve meals, gear and/or new clothes to replace the ones ruined.

Martin Mehalchin
BrainTrust

Sucharita Mulpuru at Forrester has done a great job documenting the long-term, secular decline in share of wallet for traditional retail goods. The trend toward experiential gift giving really gained steam as a post-2008 response to excessive consumption in our society and is one major manifestation of the overall trend.

REI and Sur La Table are in categories where there is a natural extension to experiential offerings and they have done a good job of developing offerings and business around it. The danger is that everyone will decide they need an experiential offering, even in categories where there’s not a natural fit. If that happens, it could lead to a lot of wasted dollars and failed experiments like we saw with “service-tainment” back in the early 2000s.

gordon arnold
Guest

This concept might help with losses sustained in the e-commerce market from low to no impulse sales. As for the brick and mortar side, I would not crowd the checkout lines with inquiring consumers. But adding standalone displays and/or end caps might be worth a look. The end caps giving consumers the ability to make recommendations for other product interests or to process orders on line might be a fun addition to the scope of this product(s) addition.

Cathy Hotka
BrainTrust

The real losers here are department stores.

For everyone else, this may look like a threat to traditional retailers, but it could also be an opportunity for partnerships that can drive sales. If you can’t beat ’em, join ’em.

Karen S. Herman
BrainTrust

I’m a big fan of experiential gifting and the unique and special value it conveys to the recipient, but it does require a higher expense of time, effort and cost on the part of the shopper.

Retailers that understand this dynamic and make the effort to “bundle” the right experience, price and promotion can assist shoppers tremendously and create that win-win that Ms. Goodfellow mentions.

I see experiential gifting as less of a trend and more of a new norm. It certainly is one of the drivers in the popularity of experiential retail design. Why shouldn’t the shopper also enjoy the experience of shopping for the experiential gift? With AR and VR and the smartphone, the shoppers path to purchase can, and should, be an enjoyable experience, too.

wpDiscuz
Braintrust
"When quizzing my grandchildren (ages 11, 10, 7 and 7) on what were the best Christmas presents they got last year, it was not the toys, the electronics or the games, it was the experiences."
"Sucharita Mulpuru at Forrester has done a great job documenting the long-term, secular decline in share of wallet for traditional retail goods."
"The real losers here are department stores. For everyone else, this may look like a threat to traditional retailers, but it could also be an opportunity for partnerships that can drive sales. If you can’t beat ’em, join ’em."

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