Consumer spending: the experience economy booms

In Europe, there is a general trend in what consumers spend money on, albeit with regional differences. In Austria, for example, there has been a noticeable decline in spending on "things" and an increased focus on fun, entertainment, and personal improvement, as the RegioData Research GmbH found in a study. In Germany, according to GfK, only one in four euros (27 percent) is spent on retail. More money is spent on services, leisure activities and other non-tangible goods that do not fall within the retail sector. This is true for most Western European countries where purchasing power levels are high. In contrast, regions like Eastern Europe still exhibit a higher proportion of spending on retail goods, but even there, the trend is gradually moving toward a greater emphasis on services and experiences.

Similar trends are observed in Southeast Asia, where consumers are increasingly spending on holidays, dining, and entertainment. Data from the bank UOB shows significant increases in travel and dining expenditures, underscoring a regional preference for experiences over material goods. Travel spending in particular more than doubled in the first nine months of the year, compared to the same period in 2022.

China is also seeing a marked shift toward services, with retail sales of services growing faster than goods sales. As the services sector only makes up around 50% of China’s GDP, it still has room for significant expansion in comparison to markets like the U.S. or the European Union with a level of 75%. The Chinese government has recognized this potential and introduced measures to promote spending on services such as dining, tourism, and accommodation. Meanwhile, retailers like JD.com observed that adventure-related products like outdoor gear and custom travel experiences are becoming increasingly popular, reflecting consumers' desire for unique, personalized experiences.

Retailers in North America like Target are also feeling the impact of this global shift, as consumers prioritize leisure activities, which often leads to tighter budgets for nonessential retail products. Overall, this shift highlights the growing importance of experiences in consumer spending habits worldwide.

There are many different reasons for this development, but one important one is the COVID-19 pandemic.

The COVID-19 pandemic significantly altered consumer behaviour, with many people initially increasing their spending on retail goods due to lockdowns and restricted access to experiences like travel, dining, and entertainment. However, as restrictions eased and inflation rates began to normalize, a noticeable shift back towards spending on experiences has emerged. Consumers are now prioritizing services and leisure activities outside the home, such as entertainment and travel, which had been largely curtailed during the pandemic. This trend is reflected in declining retail spending as people seek to enjoy life experiences over material goods once again.

For retailers, the growing preference for experiences over material goods means they must adapt by creating more engaging, immersive shopping experiences. Simply offering products is no longer enough; retailers need to transform their stores and online platforms into spaces that offer entertainment, excitement, and adventure. This could involve incorporating interactive elements, hosting events, or curating experiential promotions that tie their brand to leisure activities, travel, or personal growth. By associating their products with memorable experiences and lifestyle benefits, retailers can capture the attention of consumers who are increasingly looking for more than just a transaction.

Equally crucial for retailers is integrating social media and omnichannel strategies to create seamless, engaging experiences across digital and physical platforms. The customer journey begins with the first interaction with a brand, often through social media or online ads, and should continue long after a purchase. By leveraging digital channels, retailers can offer personalized content, virtual events, and interactive campaigns that keep consumers connected and engaged. Social media allows brands to foster communities around their products, creating a sense of adventure and excitement. The goal is to build an ongoing relationship, where the brand experience evolves and grows with the customer, both online and offline.