Regular readers of this column know that from time to time I’ll divert from estate planning topics to review economic and social trends that affect us all. Today I’m going to discuss the experience economy, which is a trend defining luxury as a move away from retail goods and towards experiences of “deep support”. What do I mean by this? Read on to find out.
Over the past twenty five years, virtually all of the 20th century luxury brands in the retail industries have become universally available commodities. It used to be only the rich could afford them; now they are enjoyed by the masses. Visit the Miromar Outlet Mall off Corkscrew Road and you’ll find name clothing brands like Christian Dior and Nautica, luggage from Louis Vitton, Coach handbags and Movado watches.
What I find remarkable about this democratization of aristocratic symbols is that while the quality of goods steadily declines, the public still pays top dollar for the symbolism. But I believe this trend is on its least legs and will be replaced by a move to “The Experience Economy” – what people want to buy are unique experiences and enhanced support.
While it’s nevertheless true that many people still feel special when adorned with luxury brands, take a close look at what they’re buying. In most cases, the materials and craftsmanship have fallen off dramatically. So how does the brand itself still possess great value? As long as the advertising, marketing and product placement keep the brand aloft, luxury profits continue to be made – for now. Eventually, of course, the inevitable commoditization trap will tighten.
Twenty years from now, Christian Dior dresses may be available at Wal-Mart’s everyday low prices. I therefore propose that “luxury” itself is moving into an entirely different realm, away from the consumption of goods, into the experience of being deeply supported in every area of life by unique processes.
Travel, for example, has become commoditized, but those selling unique experiences will continue to earn top dollar. I’m not going to pay top dollar to stay at a Motel 6, but I might to stay at the Intercontinental. Both offer me a king size bed, a bathroom and a sink. But at the Intercontinental I find myself in luxurious surroundings, where desk clerks and concierges go out of their way to help me, and the amenities are top notch. I feel special and supported when I stay at the Intercontinental.
A travel company by the name of Backroads offers unique bicycling, hiking and adventure sport experiences across the globe. Their trips aren’t inexpensive, but if you don’t book early you’ll likely not get your first choice destination. I’ve personally experienced several Backroads led trips, and can tell you that the support is second to none, leaving you feeling like a kid at camp. They have guides that meet your every need. All you do is show up and have a great time. At the end of the day after a bike tour through the mountains or a white water rafting excursion, they hand you the keys to your luxury hotel suite where your bags have already been waiting.
Why would anyone pay $5 for a cup of coffee? The people at Starbucks have successfully answered that question. They aren’t selling a cup of coffee; they’re selling a place to gather and talk, surf the internet for free and listen to great music. Starbucks isn’t competing with Denny’s. It’s creating a social experience.
Likewise with Barnes & Noble. You could borrow a book for free from the Lee County Public Library. But why have such a drab experience selecting your next good read when you can instead drink a double mocha latte while browsing with friends?
Remember looking for furniture at huge warehouses like Levitz? The salesman there was the guy who worked at Sears last week and changed jobs. Levitz is now bankrupt while Robb & Stuckey employs interior decorators to help make its customers homes look fabulous.
No time for shopping? Hire a personal shopper. Your kid isn’t doing well in school? Enroll junior at a Sylvan Learning Center where he’ll get his own personal tutor. Need help losing weight? Your local gym offers personal trainers.
The experience and support economy is in full bloom. Granted, the recent economic downturn has dented its progress. Rest assured, when the economy rebounds, you’ll likely see this trend continuing.
Those that recognize the demand in their own particular fields will capitalize. Those that don’t will be commoditized. It will be interesting to watch over the next decade.
©2008 Craig R. Hersch .Learn more at www.sbshlaw.com