Rise of ‘experience economy’ explains retailers’ Christmas success, says retail expert

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The strong performance of retailers over the festive period is due to a growing trend among consumers to spend money on experiences rather than products, according to a leading retail expert at Aston University.

Professor Heiner Evanschitzky, director of the Aston Centre for Retail Insights (ACRI) at Aston Business School, said: “What we have seen over the Christmas period is that retailers’ results are linked to two key underlying trends in consumer purchase behaviour: the use of online to make purchases and the pursuit of inspirational shopping experiences.

“The trend towards spending money on experiences, such as having fancy home-cooked dinners, has become ever more apparent over the holiday period. Credit card transaction data shows that we might have just reached ‘peak stuff’, meaning customers realise they’ve basically got everything they need and can use their extra cash on experiences, rather than simply buying more stuff. We are evolving into an experience economy.

“This trend is clearly visible in the recent retail results. Tesco’s 1.3% rise in sales has come in large part from sales of fresh foods. Likewise, Morrisons’ strong performance was driven by its up-market food ranges, and Aldi also had a very successful Christmas period, recording a 27% increase in their premium range. Meanwhile, Sainsbury’s’ record sales [the retailer has reported Christmas sales of more than £1bn across the group and a 0.1% increase in like-for-like sales for the 15 weeks to 7 January] are in large part due to its well-developed online presence, providing shoppers looking to avoid the cold with alternative means of making their purchases.”

But Professor Evanschitzky warned that retailers need to be wary of rising levels of unsecured consumer credit to ensure customer loyalty in the future:

“Unsecured consumer credit is now higher than before the financial crash. Retailers need to think long-term and help customers manage their budgets more effectively.

“It’s not sustainable to sell products to consumers that they can’t afford. A responsible retailer needs to help consumers live within their means. Doing so would ultimately be repaid by customers with loyalty and repeat patronage. This is especially true as we look ahead to a challenging 2017, in which wages are unlikely to keep up with rises in inflation.”