Retailers are turning to entertainment to win shoppers attention

Legacy retailer Gap Inc. made an unconventional hire earlier this year: a chief entertainment officer.

It was a newly created role as the company tapped former Paramount executive Pam Kaufman to helm its entertainment, content and licensing platform. Gap has since rolled out major campaigns, partnering with bands like Just Your Type and building on the success of last year’s ads with girl group Katseye.

“Beloved brands have value beyond the products they sell. Consumers identify with them, trust them and want to be part of their world,” Kaufman told CNBC in a statement. “The key is authenticity: Every extension has to reflect what the brand stands for and give its fans a meaningful new way to experience it.”

She said it’s part of a broader goal to emphasize what Gap calls “fashiontainment,” a strategy to blend retail and entertainment to better align with consumers. Gap is part of a growing cohort of retailers investing in entertainment and experiences both in-store and through exclusive online content to drive engagement.

“Brands are stories, and we are the storytellers,” CEO Richard Dickson said at the Goldman Sachs Global Consumer and Retail conference in September. “I think you could see that come to life when you look at some of the work that we’ve done, putting our brands in the center of culture and cultural conversation.”

In another blending of retail and media, Mattel made waves a few years ago for its “Barbie” movie, building on the intellectual property of a decades-old fan favorite and drawing in massive box office success. At the time, Dickson was president and chief operating officer of the company, witnessing firsthand the sectors’ intersection before departing for Gap.

“I think the post-Covid consumer attitude around shopping certainly evolved a lot,” said Bryan Eshelman, who leads the retail practice at consulting firm AlixPartners. “It has gone from shopping as a fulfillment task to shopping, in many instances, more as an entertainment form.”

Between experiences in physical stores and media campaigns featuring exclusive content, Eshelman said, retailers are getting more creative about the ways they’re driving engagement and marketing.

“Community, at the end of the day, is one of the key ways to drive loyalty, so I think retailers of all types are trying to tap into some sense of community, some sense of lifestyle, some sense of belonging that’s beyond the product that they offer,” he said.

Branded entertainment has been around for a long time. Procter & Gamble made headlines in the 1930s for helping to coin the term “soap opera,” and companies have for decades created media campaigns to draw in customers.

But with the rise of social media, content creation and short-form offerings, experts said audiences are becoming hungrier than ever for something new and original.

The retail and entertainment intersection is happening at a time when intellectual property is becoming more valuable than ever, according to experts.

As consumers encounter more marketing than ever, the companies that will win the battle for attention are the ones that can “cut through all of the noise,” said Alex Michael, senior managing director at investment firm LionTree.

“The hardest thing to find and to get is audience these days,” Michael told CNBC. “IP, in that sense, is the most valuable thing out there, and only becoming more valuable because it’s attached to audience.”

At the same time, he said, the way IP is distributed is broadening to include video, audio, short-form, long-form and live event content. Consumers are also redefining their loyalty to brands, which means companies have to “play much earlier in the consumer journey” than they have in years past to secure their trust, he said.

The trend is also likely helped by executives who have worked in both retail and entertainment: Gap’s Kaufman came from Paramount, for example, and Dickson and Skydance co-CEO Ynon Kreiz held top roles at Mattel.

“The gray areas have never been more pronounced as to what is classically defined as retail or media or entertainment or live events,” Michael said. “People who have cross-sector expertise are increasingly more valuable because you can’t be defined by a single vertical, especially as things change so quickly.”

Still, there’s room for newer players, especially with the studio landscape rapidly changing, said Sean Akaks, the CEO of SonderCo, an agency that partners brands with celebrities and entertainment properties.

“I think it’s a really interesting time for nontraditional players to be making content because you’re seeing this massive consolidation of these legacy entertainment companies,” he said. “I think there are just more open lanes for independent creators and also brands and anyone outside the traditional studio system to create content.”

That’s where retailers might tap creators, Akaks said, because they can use their platforms to reach consumers directly.

“I do think there’s a world where we’re going to see creators and brands sort of co-creating IP that maybe they’re owning together,” he said.

Once those companies get consumers into the store, they’re also leaning into experiential retail, making shopping a more immersive experience than it otherwise would be, like Dick’s Sporting Goods offering interactive activities and simulators in its stores.

According to data from AlixPartners, companies investing in experiential retail such as Coach and Ralph Lauren saw close to 10% year-over-year increases in consumers’ average basket size.

“The idea that retailers would potentially invest in some distributed electronic content to help drive traffic, and then when you get there, it’s experiential — it really goes into the kinds of flywheels that entertainment companies are also trying to build and grow,” said Jeff Goldstein, co-lead of the media and entertainment practice at AlixPartners.

Yet, the entertainment that retail brands are developing is only one piece in a larger puzzle to retain customers and attract new ones. Translating that into tangible sales growth isn’t necessarily a given.

“The basics of having great product in stock at a transparent price that feels like value is not swept away by animatronics,” AlixPartners’ Eshelman said. “The fundamentals are still there, and if you’re going to have a good retail proposition, you need to have that balance. You can’t mask bad product at a bad price with no inventory with glitz and glamour.”