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Experiential Retail for Luxury Brands: Using Non-Traditional Stores to Reach Untapped Customer Segments
Authors: Anne-Sophie Riegger (EBS Universität für Wirtschaft und Recht, Germany), Jan Klein (Tilburg University), Katrin Merfeld (EBS Universität für Wirtschaft und Recht, Germany), Sven Henkel (EBS Universität für Wirtschaft und Recht, Germany)
Facing challenges such as an aging customer base and being perceived as antiquated and outdated, luxury brands need to identify novel ways of approaching new target groups. Specifically, among younger customers a shift in attitudes away from luxury consumption towards experiences can be observed. This goes hand-in-hand with a decreasing affinity for brands and an increasing demand for superior customer experiences. That is, younger customers expect memorable experience from the retail and service environments of brands.
Non-traditional retail and service formats are one strategy implemented by luxury brands to address this need. Specifically, luxury brands use experiential stores to reach the currently untapped potential of younger customers that are becoming increasingly distant to luxury brands. Experiential retail stores are a synthesis of a store and an event. These store concepts seek to provide interactive and memorable experiences with a brand by designing new store environments and by inviting artist to perform in the store. However, which elements of experiential stores might drive the engagement of new customer segments that are currently distant to luxury consumption is unclear. Specifically, setting up an experiential store might not only require a certain store atmosphere, but also a specific provision of services via the events.
As existing research on this topic is scant, we take a mixed-methods approach to identify and empirically tests key success factors of experiential retail stores in the luxury industry. We first conduct a qualitative study to identify the key factors of experiential stores. We interviewed 85 customers of an experiential store that was specifically designed to address new target groups. The store, for example, offered several events with artists that are targeted at a younger and hipper target group than the brand’s traditional luxury segment. We transcribed and analyzed the interviews. Our analysis reveals four factors of the store and events that are important for this new target group: (i) authenticity, (ii) inspiration, (iii) mystics, and (iv) exclusivity. First, the events and the experience need to be authentic to the culture of the new customer segment. Second, the events need to inspire customers to consider new ideas or to broaden their horizon. Third, the atmosphere should provide a novel feeling of mystique. Fourth, in line with more traditional luxury retail, the atmosphere should give the customers the feeling of exclusivity. Based on the insights from the qualitative study, we developed hypotheses on the effects of store and event characteristics on brand and behavioral outcomes (e.g., WOM). We are currently testing theses hypotheses by collecting data from visitors of the same store and analyzing the data via structure equation modelling.