Victor Ho is the CEO of Fivestars, a payment and marketing platform building the largest local small business fintech network in the U.S.
The “experience economy” took the world by storm in recent years. Most major restaurants, hotels and retailers announced strategies to renovate their stores in efforts to offer consumers unique and novel experiences. Even digital-first companies invested millions in their physical footprint.
However, in-person dining and shopping experiences came to a halt when Covid-19 hit. With the sudden decline of in-store shopping as we know it, a retailer’s typical “experiential” strategies were placed on the back burner. Instead, they catered to the demands of the new shopper — one who simply wanted safety, convenience and affordability. And so, the “chore economy” was born. Under this new standard, big businesses and e-commerce behemoths thrive.
But still, small businesses should be banking on the return of a suppressed customer demand for experiences. It’s in this “experience economy” that I believe they will always have the upper hand.
Big Businesses And The Chore Economy
“I have to buy this.”
Perhaps “this” is toilet paper, a carton of milk or dog food. Chore retail is when the task feels mundane but still mandatory. Customers might wish they could eliminate these shopping trips altogether, so the next best thing is to have the quickest and most convenient trip. Chances are, a big-name supermarket or drugstore chain is getting your money when it comes to chore purchases. And e-commerce is increasingly competing for those dollars.
With quick delivery speeds, customers will likely continue to spend more money on getting products delivered right to their doorstep. I don’t blame them; if a purchase is a chore, why not spend minimum time working on it? During Covid-19, Amazon rebounded to its best earnings ever. Initial shortcomings were only because it could not keep up with demand.
Small businesses don’t have the same margins as big-box retail and struggle to win customers for “chore” trips when they can’t offer rock-bottom prices or quick delivery. But small businesses shouldn’t raise their white flags just yet. Instead of competing in the chore economy, they’re still uniquely anchored in the hope that the experience economy will be the competitive advantage to keep them afloat.
Small Businesses And The Experience Economy In The New Normal
“I want to buy this.”
When you’re shopping or dining for pleasure, your priorities shift. In my experience, customers choose the shops not solely based on speed or price. Instead, the decision-making process is more nuanced. They’re looking for a fuller, multidimensional experience. They want a social experience or an escape from the routine. This is where small businesses win.
For example, if you wanted to get high-quality leather shoes, you might pop your mask on and go over to the boutique artisan shoe shop downtown. If you want to take your partner on an anniversary date, you might take an outdoor dining visit at a charming family owned French restaurant over pizza from a restaurant chain.
This “experience” retail is hard to do online, and small businesses have a natural advantage because they provide a unique product or service, differentiated from big-chains and therefore valued as authentic by consumers.
Because experiences — not chores — is where I believe small businesses shine, the pandemic presents an opportunity for small businesses to reevaluate what experiences matter to their customers and where they can truly outdo their competition. Small businesses can master experiential trips to win customers by focusing on the following three things:
1. Feedback: Small businesses can collect feedback from customers through loyalty platforms, social media polls, analytics from payment databases, direct messaging tools and, of course, in-person conversations.
2. Differentiation: Lean into one area of expertise, focusing on what makes the business unique. Analyzing insights offered through feedback tools is vital to understanding your strengths and capitalizing on the unique experiences and offerings customers actually value.
3. Personalization: Research shows 40% of consumers are likely to buy more from retailers that personalize their shopping experience. Customers don’t want to feel like a part of a crowd; they want to feel as though your business is there to serve their specific needs. Giving customers rewards from loyalty programs is a great way to make them feel seen and heard, and encourage regular customers to return. One-on-one consultations or virtual appointments are also effective.
As we think about our post-pandemic world and what’s in store for the future of retail, it’s important to consider that, from my perspective, the demand for retail experiences is still strong, only repressed due to safety concerns and regulations. The core shift in consumer spend on experiences has not ended. I believe it’s simply paused, and the dip is temporary. I am confident there will be a thriving economy of Main Street America in the near future.
A recent report by SAP found that 53% of top-performing small and medium-sized businesses consider the quality of their customer experience as their top strategic priority for the next three years. As shops reopen, small businesses can make a lasting impression on new and old consumers by wooing them with intentional engagement and authentic relationships.
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