Consumers are buying experiences instead of stuff

“I will literally say, ‘I don’t want to spend $150 on this dress -- but let’s go to this awesome sushi restaurant where I’ll spend $200,’ ” Mary Kate Allen-Mehryar, shown here Arlington, Va. That sentiment is hurting retailers. CREDIT: Photo for The Washington Post by Jabin Botsford.

WASHINGTON – Macy’s, Urban Outfitters, Bed Bath & Beyond and others this month reported ringing up weak sales during the holiday shopping season, capping a tepid year that many in retail attributed to cautious consumers who are not ready to forget the lessons of the last recession.

And yet look beyond the mall, and there’s a different dynamic: Spending on air travel hit record levels last year, even as the average price of an airline ticket dropped. Restaurant sales were up a robust 8 percent in the first 11 months of 2015, easily outperforming the 2 percent increase seen in the overall retail industry. Millennials were on track to spend an average of $750 each in 2015 on media, including video games and streaming services such as Netflix and Spotify.

In other words, consumers are plenty willing to open their wallets, but what they choose to buy reflects a fundamental shift: Increasingly, shoppers are passing up the cashmere sweaters or leather handbags and instead shelling out for experiences such as a beach vacation, a dinner out on the town or a concert.

“People are saying, ‘I’ve got enough stuff. I want to pamper myself a bit and do something that makes me feel good,’ ” said Steven Kirn, executive director of the University of Florida’s retail education and research center.

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That’s been the approach of consumers like Mary Kate Allen-Mehryar of Arlington, Va., who is headed next month on a vacation to Key West to celebrate her 30th birthday and has recently dropped money to dine at upscale D.C. restaurants Rose’s Luxury and Makoto.

“I will literally say, ‘I don’t want to spend $150 on this dress — but let’s go to this awesome sushi restaurant where I’ll spend $200,’ ” Allen-Mehryar said. “I don’t get buyer’s remorse when I buy food,” she added, because dining out is something she gets to share with friends and family.

That mind-set has made for a tough environment for many retailers, who now must not only duel with one another for business but must try to persuade legions of consumers to essentially make a lifestyle change: trade filling up their calendar with activities for filling up their closets with stuff.

Executives of some of the biggest names in retail say these spending habits are weighing on their businesses. Macy’s chief executive Terry Lundgren has said he believes his company’s sales have struggled because customers these days are willing to pony up for things such as autos and technology but just aren’t buying what Macy’s sells. The department store this month announced that its sales plummeted during the holiday shopping season and that it would be closing stores and cutting thousands of jobs in 2016.

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At Ascena Retail Group, the parent company of Ann Taylor and Dressbarn, chief executive David Jaffe has said sales have been hurt in part as a result of their shopper “spending more money on her experiences.”

Nordstrom, too, alluded to this issue in explaining disappointing sales.

“It’s a traffic thing,” James F. Nordstrom Jr., president of stores, said on a conference call with investors. “We’ve got less people buying clothes this quarter than we expected, and there’s really nothing else to point to.”

In this climate, retailers and shopping centers are trying to better compete for consumers’ attention and dollars by jazzing up their stores. If people are looking for an experience, they reason, they need to give that to them when they visit the mall.

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Nordstrom, for example, has begun adding counters to its women’s shoe department in which shoppers can customize their footwear. Women can check out fabric samples and various design details such as heel height and toe shape and then create their own shoe.

Lululemon, meanwhile, is offering a concierge service at its flagship store in New York’s Flatiron District to help shoppers book a spot in an exercise class or find a running route in the city.

Urban Outfitters has sought to adapt to this new reality by investing in a company that is far away from its core business of selling hipster clothes to the college set. The company recently bought a pizza chain called Pizzeria Vetri, saying that it saw big opportunity to expand the chain in a moment of strong spending on casual dining.

Experts say millennials may be an important driver of the spending-on-experiences trend. In a survey conducted by the consultancy PwC last year, millennials said some 52 percent of their holiday spending would be on experience-related purchases, compared with 39 percent for older consumers.

“The trend will only accelerate as they continue to have more and more of an ability to pay” for such purchases, said Sarah Quinlan, who studies consumer spending patterns as the head of market insights for MasterCard Advisors.

Vacations and dining out are each projected to see a 27 percent increase in consumer spending between 2015 and 2019, according to a study conducted by market research firm Mintel. That is the strongest growth of any spending category.

Malls and shopping centers are also moving to configure themselves for an experience-seeking consumer. Tom McGee, the chief executive of the International Council of Shopping Centers, said restaurants, theaters and gyms are now taking up a greater share of such properties.

“I think the owner-developer community has recognized the need to evolve,” McGee said. “You’re going to have [design] reconfigurations, more open-air, more experiential aspects.”

To be sure, a small set of retailers have managed to deliver robust sales growth despite these head winds. TJX, the parent company of T.J. Maxx and HomeGoods, has been on a hot streak, with sales leaping 5 percent last quarter. L Brands, which owns Victoria’s Secret and Bath & Body Works, saw its quarterly sales jump 7 percent. On Thursday, the company said sales were up an eye-popping 8 percent in December at its stores open more than a year.

But overall, many chains, especially apparel sellers, are struggling to find their footing in this environment.

“I think they’re having a hard time,” said Randy Allen, a senior lecturer at Cornell University who studies retailing. “They know that they need to [change] and they’re experimenting, but I think the jury is out on how well they’re adapting.”