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Phygital: the future of retail

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Almost overnight in March last year, the option to go into a physical shop was no longer available to us and we turned to the world of online shopping. However, with the UK emerging from lockdown restrictions, does the physical experience of walking around and purchasing in a shop still matter as much to consumers? Is ‘online-only’ going to become the preference? Or is ‘phygital’ – where the physical and digital coincide – the way forward?

As a result of the pandemic, online retail sales grew by 46% in 2020, compared with the previous year, and had the largest annual increase since 2008. Unsurprisingly, food retailers reported the largest increase in online sales of 79.3%, a record annual increase for the sector. However, all these rises were arguably led through necessity not choice.

But as shops are opening again, there is an opportunity for shops to be more than a place to just purchase products – this can be done easily online. Shops, instead, can become the destination for experiences, entertainment and real-life connections. Research has shown that 46% of consumers still prefer to shop in person, and even the LVMH CFO has said the store experience is something that cannot be matched on the internet. However, at the same time we also want the immediacy, ease and speed that digital commerce can offer us, with research finding that 63% of shopping journeys start online.

So, what does ‘phygital’ mean for brands, and who is doing it?

Ultimately, phygital can be defined as the creation of a blended customer experience where both the physical and digital coexist in the same journey. It takes the best aspects from each space to create a much more holistic, satisfying and unique customer experience that leaves a lasting impression for brands. From digital, you can take the immersion, immediacy and speed, and combine it with the brick-and-mortar human interaction.

Phygital isn’t just about improving customer experience and driving sales. For example, if done well, it can capture consumer purchase behavior to create a more holistic view of your consumer. It can also drive brand engagement and awareness, and even create new media opportunities.

Amazon Fresh (UK): a fresh, new business model

Amazon Fresh opened this year in West London, its first UK store. Simply, Amazon Fresh allows consumers to shop and leave without scanning items or queuing to pay, but crucially it uses the Amazon app as the conduit to bring the physical and digital experience together. Customers enter by scanning a QR code from the app, and cameras and sensors track what items they are picking up throughout the store, placing them in a virtual cart.

However, the relationship between the store and app really comes into its own when consumers leave the shop – they are charged via their Amazon account and emailed their receipt. There is no need to queue or to set-up anything new – all you need is your Amazon account accessible via the mobile app and you’re ready to go. This is a great example of leveraging existing digital infrastructure that consumers are familiar with and use extensively, in a physical environment to make their experience slicker and quicker. This model also gives Amazon a greater pool of purchase data to analyze and leverage, and ultimately inform future marketing strategies.

Glossier: it’s not just about sales, it’s a chance to ‘meet’ the brand

Glossier is another great example of a brand that was born online but has evolved to create a physical destination that brings to life its values. Its New York flagship offers up the ultimate physical experience that makes each customer feel a part of the Glossier community – it’s the opportunity to ‘meet Glossier in real life’. From a consumer sales journey perspective, it has created its own point-of sale system that allows consumers to start an order in-store and complete it online later, creating a more singular view of the consumer.

However, I think more interestingly, it has also thought about how this physical store can help support its marketing teams and help encourage consumers to create social content for them – and for this, it has created a dedicated room to inspire content creation! This shows that phygital experiences don’t just have to be about driving sales, but can help drive brand engagement, awareness and media opportunities, especially through earned or influencer value. Glossier doesn’t need to create a physical store to drive sales (it’s valued at over a billion dollars), but realized the benefits of in-store experience stretched far wider than just sales alone.

What does this mean for the future, and how can brands get started?

Digital and physical retail still have their individual merits – we seek physical experiences, but we are also becoming reliant on digital technology. One shouldn’t discount or make the other obsolete; when combined in the right way, they can make a consumer’s life that much easier – and exciting!

Taking all this into account, to kick-start your phygital strategy, there are some initial steps brands can think about:

  • Pinpoint your goals. As highlighted in the Glossier example, this doesn’t necessarily need to be just sales. Phygital can give you the opportunity to drive other marketing metrics and media value.

  • Understand the data you have and really need. Recognizing your audience and their current experiences is key. Leveraging what you already know and capturing further first-party (or even zero-party) data from consumers will help inform where the addition of physical or digital elements can really make the impact that they’ll remember.

  • Utilize existing infrastructure. Involving channels (instore, app, online etc) that you already have – and that consumers understand – is a great place to start and can enhance and make their experience even more seamless. Amazon has shown to great success that using its infrastructure helps to create a more holistic view of the consumer and allows to capture further data and focus its efforts on media targeting. It also ensures a smooth and easy consumer journey based on channels the customers already recognize.

  • Messaging is crucial. Ensure consistent messaging across every channel that your brand is represented on – consumers need to truly understand your brand values and, no matter whether online or offline, it must be clear what you stand for. 64% of consumers say that shared brand values are the primary reason they have a relationship with the brand.

The final step is to then understand what is the art of the possible in-store and online. CornerShop , a Capgemini, SharpEnd and The Drum Labs partnership, has been designed as a live testing environment for brands, retailers and shoppers to get hands-on with the latest technologies that reimagine the shopping experience across food and drink, cosmetics and fashion.

To try and uncover what phygital looks like in this post-Covid-19 world, brands must continue to understand the changing consumer landscape of today, and how the right strategy and innovation can enable new ways to evolve a more blended customer experience. They also need to ensure that the experiences they do deliver are embedded with their core values. This in turn will help to improve in-store and online operations and allow consumers to rediscover the joy of in-person retail, even if it does look slightly different than before.

Jessica Goldesgeyme, consultant, Capgemini Invent

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