Part 3: We're Just Getting Started
Like any good movement, the rise of IRL Member Communities isn't happening in isolation.
In a 2010 essay, Chris Dixon wrote, "The next big thing will start out looking like a toy." Provocative. What he meant was that new technologies are often dismissed as toys because they undershoot user needs, and that that ones that make it out of toy phase and into the zeitgeist do so because they ride external forces.
In the case of IRL Members Clubs, there are three big external forces at play: The Death of Retail, The Experience Economy, and Work's New Job.
The Death of Retail
Retail as we knew it never recovered from the Great Recession.
Holiday sales for e-commerce rose 11% YoY between 2015 & 2016, while brick-and mortar saw only a 1.6% increase, and department stores experienced a 4.8% decline. While the supply of mall space continues to grow, mall visits declined by 50% between 2012-2013 and have continued to decline ever since.
It’s not just suburban malls that are being hit. New York City's Department of Small Business Services recently found that 8.9% of retail storefronts were vacant, while Morgan Stanley and Douglas Elliman claim that up to 20% of storefronts in Manhattan are vacant, or about to be.
But Web Smith, the founder of 2PM, believes that retail isn't dying, it's just taking a different shape. According to Smith, "What we are witnessing is a reflection of America’s dying middle class. We are experiencing a boomer correction."
He argues that as Digitally Native Vertical Brands (DNVBs) grow and seek deeper relationships with their customers and lower acquisition costs, they will move into the spaces left vacant that are no longer relevant to a middle class that no longer exists.
Mall operators agree, and are taking action. In February 2018, the publicly traded mall REIT, CBL, appointed Jim Ward to a new role heading up recruiting of digital natives. Ward says that "every landlord out there is looking for these new exciting concepts."
Matt Alexander, the co-founder of Neighborhood Goods, a "new type of department store," says that his company plans to open a new location every three to four months, and that "certainly we have the real estate interest."
Whether you believe that retail is dead, or that the tenant mix is just shifting, the market is undergoing a structural change. Landlords are willing to get creative to fill vacant spaces, and there are only so many DNVBs to fill them. So companies are are popping up (puns always intended) to take advantage, putting people where products once were.
The Experience Economy
Despite the decline of traditional retail, US consumer spending has more than doubled from just over $6 trillion in 1999 to $14 trillion in 2019. And while fast-growing, e-commerce in the US still represents less than 2% of total consumer spending and doesn't explain the rise.
So what are we spending all that money on?
According to McKinsey and the World Economic Forum, we are shifting our spend from goods to experiences. In a December 2017 report, McKinsey points out that "personal-consumption expenditures on experience-related services have grown ... nearly 4.0 times faster than expenditures on goods."
The relative outperformance of experiences, McKinsey claims, is largely driven by Millennials, who are spending on experiences based on three main factors: a more holistic perspective on what leads to happiness, the growing importance of social media and "quest for likes," and increasing FOMO.
The World Economic Forum also wrote a report on the rise of the Experience Economy: The experience economy is booming, but it must benefit everyone. They, too, argue that experiences create more happiness than goods. One section of the report jumped out at me.
According to the researchers, experiences create more lasting happiness because they are more open to positive reinterpretation; they tend to become more meaningful parts of one’s identity; and they do more to foster social relationships. Experiences help us learn, grow and connect with each other, so it’s no surprise we choose to spend our money and time on them.
For better or worse, people are pushed to interact with each other in new places in the real world so that they can share their experience on the internet. Fortunately, they "learn, grow, and connect with each other" in the process.
This idea describes why something that seems like a toy - a beautifully-designed, members-only club - can act as the wedge to drive increased happiness and social change. Sometimes you have to do the "airplane" to get your kids to start eating vegetables.
As a result of the shift to an experience economy, even purveyors of goods are focusing their retail efforts on experience. They provide the things that you can't get online, offline.
With its retail locations, Glossier doesn't do stores, they do "a social club for the like-minded, an auto-body shop for the human body." Founder and CEO, Emily Weiss, told the New York Times, "Once they got upstairs, they didn’t shop and go. They really hung out, sometimes for hours. At one point, someone even ordered pizza.”
In March, credit card startup Brex opened up a members-only lounge, The Oval, where it "hopes to foster a sense of community through hosting events." In September, Brex revived the shuttered South Park Cafe, asking, "how could we revitalize this for ourselves and for the community and make something that was awesome, awesome again without the worries of it being like a super profitable business." The wording is 🙄, but the concept is 💡.
It's mind-blowingly easy to purchase these companies' products online. So they sell online. And they use offline to build connection, community, and relationships with and among customers.
Experience is the new status symbol, and community commands a premium.
Work's New Job
Since before America was born, work has defined who we are, often literally. My last name is McCormick, which means that I'm the son of the son of the son of the son of someone who was a corb mac, or a charioteer.
For generations, we have shown up to an office, a factory, or a farm every working day to do a job in exchange for the money we needed to live the rest of our lives.
But work's job in our lives is changing. Once a catchall that provided us an identity, friends, a salary, a community, consistency, and a place to go every day, work's job description has shrunk. 64% of us expect to spend less than two years in a job, and more of us are skipping the office altogether.
The ubiquity of the internet and changing cultural norms enable us to work from home. The stats are astonishing: about 4% of the U.S. workforce is remote, an increase of 159% since 2005, while 43% of employed Americans said that they spent at least some time working remotely, and of those who have worked remote, 99% said that they wanted to work from home at least some of the time for the rest of their careers.
The benefits are even more compelling: a Stanford study on working from home found that home working led to a 13% performance increase and 50% declines in attrition, and other studies have found that remote work improves diversity, saves costs (for both employer and employee), and improves happiness by 29%.
Importantly, remote work also gives employees back nearly 300 hours a year in commute time.
So what's the catch?
Loneliness. In Buffer's survey of 1,900 remote workers, loneliness was the biggest reported struggle at 21%.
This presents a huge opportunity for IRL Member Communities.
In the past, we had no choice but to be in the office, so our office mates became our real mates, and employers built environments and programming that encouraged employees to spend more time at the office. With the rise of remote work, however, a job no longer has to do it all. We can be more productive working from home, get our work done, collect our paychecks, and spend our free time in spaces whose main job is providing us community, fun, and growth.
To test this theory, I ran an informal twitter poll last week.
It's a small sample size, but it shows that people are open to clearly demarcating their work and social lives.
Our relationship with our jobs is changing. Our jobs can give us a sense of accomplishment, professional growth, and a salary, and IRL Member Communities can give us community, personal growth, and a cure for loneliness.
The three trends we have discussed - the Death of Retail, the Experience Economy, and Work's New Job - lay the groundwork for an explosion in IRL Member Communities. There are spaces available in which we can gather, and more disposable income and time available for experiences that make us happy and connect us to each other.
In Part 4, we will tie everything together to imagine the possibilities open to the new world these trends support, one in which we do what is best done online, online, and what is best done IRL, IRL.