What is Phygital Retail and why is it the future of retail?

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During the pandemic, the huge shift by customers and brands to digital retail looked like it could be the end of physical retail for good. Instead, it was a reminder of the vital role that physical retail plays in an all-encompassing retail experience. 

Now in-store shopping is far from dead. Instead, consumers returned. 

Similarly, the social element of stores was highlighted because human contact was restricted. Meanwhile, consumers who had ignored digital retail previously recognized its benefits. 

What has emerged now is a growing recognition that both channels play important roles and that by combining physical and digital the resulting phygital retail concept delivers the best of both worlds.

Combining the physical with the digital world 

The two channels working together isn’t new. Multichannel and omnichannel strategies brought together the value of multiple channels but phygital retail is about a more immersive experience. 

Today, two years after the pandemic emerged, phygital retail recognizes that both channels can be as important as each other and that a blended offer can deliver an accentuated, powerful customer experience that is stronger than one channel alone. 

The important role of phygital retail has been highlighted during pandemic lockdowns. The increased use of virtual and augmented reality technology and buy online, pick up in store strategies, for example, were vital for retailers who had no choice but to bolster their digital presence but for whom physical retail still played a key part in buying decisions. 

The benefits of Phygital Retail 

The combined offer is certainly compelling. Separately both physical and digital retail have their own benefits. These can vary depending on the product category, size and complexity. For instance, through digital retail shoppers can browse, research and price compare on the goods they want and can ensure delivery straight to their door. But they aren’t able to see and touch such products before making their buying decision unless they head to the store. 

In phygital retail both channels are an important part of the customer journey and buying decision, even though the impact may not be obvious. For instance, in the past retailers might have looked at the poor sales of a physical store and assumed that it delivered little impact to the bottom line. 

But that assumption fails to consider the benefits of such physical strategies in supporting digital retail – whether it’s a place to see the goods in person or simply a brand awareness generator. 

5 Examples of Phygital Retail Strategies 

1. Click and collect 

In the US shoppers spent $72.46 billion via click and collect in 2020, a 106.9% rise in 2019, with click and collect now accounting for 9.1% of all retail commerce sales. It’s estimated to grow a further 15.2% in 2021 to hit £83.47 billion. Click and collect offers came into their own during the pandemic and retailers have worked hard to bolster their efforts further since. 

Many developed contactless deliver-to-car strategies to further improve customer safety, as well as offering added convenience for customers who wanted certainty and immediacy of delivery. It benefits the retailer too, saving on shipping costs, making use of local store inventory and allowing the potential for upselling instore. 

2. Buy instore deliver at home 

Buy instore deliver at home is basically click and collect in reverse. Rather than the customer beginning their purchase online but ending instore as with click and collect it means that they start the journey instore but end it digitally. 

The reasons for this can vary. It might be that the item, size or color isn’t in stock instore but is available online. By concluding the sale while the customer is still instore the sale isn’t lost. Alternatively it may be that the item is too big or awkward to take away at the time so online fulfillment best suits. 

3. Popup stores 

As mentioned earlier physical stores can play a vital role in building brand awareness. For pure play retailers it can be a pre-cursor to testing the potential of more permanent physical stores or it may be an experiential strategy to help to drive consumer awareness and interest. Pop-up stores aren’t new but the benefits they provide in helping to deliver physical experiences, boost brand awareness and trial locations or concepts without commitment remains unrivaled. 

4. Checkout free shops 

Checkout free shops are also growing. These stores allow customers to shop and put items in their basket, but without having to go to checkout before they leave the store. Supermarkets have been gearing towards this with self-scanning technology allowing shoppers to put items straight in their basket and minimize the checkout experience, but true cashier-free shopping is now emerging thanks to Amazon. 

5. Visualization technology such as AR and VR

Visualization technology such as augmented and virtual reality is increasingly helping to bring products to life and many retailers have intensified or accelerated projects in this area. 

Research shows that 61% of consumers prefer to shop with retailers that offer AR and the incorporation of such technology is expected to become a requirement for shopping online, rather than just a nice to have. AR and VR technology can be used instore to help customers visualize items in their home, such as furniture, or try on clothes without the hassle of getting changed. Alternatively the technology can be used online to allow customers to design and plan room sets such as kitchens and bathrooms.

3 Phygital Retail Examples 

Click and collect: Walmart, The Home Depot, Best Buy, Target and Lowe’s

According to eMarketer Walmart, The Home Depot, Best Buy, Target and Lowe’s are driving click and collect expansion in the US. The five companies accounted for $44.2 billion of the $72.46 billion spent via click and collect in the US in 2020 and 41.9% of combined ecommerce sales. Particularly strong click and collect growth is expected in the grocery market which is expected to hit 60.4% by 2022, compared to only 39% in 2019. 

The same day capability of click and collect offers has seen them grow hugely. Target for example saw growth in excess of 700% for its drive-up service in Q2 2020 as the pandemic set in. 

AR and VR: Macy’s

Department store Macy’s has invested in AR and virtual room planning for its customers. Its room planner solutions allows customers to create a room in seconds into which they can then drop Macy’s furniture. The technologies can be used in assistance with a design assistant remotely and help customers better visualize how such items will work in their space, switching in alternatives if required. 

In selected stores customers can also use a VR headset to visualise the space. The company says the technology not only helps customers to see their space but gives them more confidence in what they are buying and can encourage customers to add further products to their initial purchase. Customers can also virtually trial other room elements such as wall colours, and accessories.

Just walk out stores: Amazon Go

The Amazon Go store format was originally trialled in Seattle in the US in 2018 and has since been followed by further stores across the US as well as a UK version, Amazon Fresh. The concept allows customers to scan a QR code on their phone to enter the store. They are then able to add products to their basket but don’t need to go to checkout after. Instead the Amazon Go app automatically charges the payment method linked to the customer’s Amazon account. 

As well as Amazon’s own stores in March 2020 Amazon announced that the Just Walk Out technology would also be available for other retailers. UK retailer Sainsbury’s was announced as the first international business customer of the technology in November 2021 with the opening of its SmartShop Pick & Go. 

Phygital Retail: The Future of Retail

There is no doubt that phygital retail is here to stay. The physical and digital have merged in retail just as they are merging in other elements of consumers lives. 

Forward thinking retailers are realizing that both physical and digital retail have their own benefits but that expertly combined they deliver a compelling, combined storefront that meets a much wider range of customer requirements.