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May 16, 2024
Is It Time for Phygital Retail To Become Mainstream?
In 2022, BrainTrust members discussed the notion of a phygital retail future. Now, over two years later, we take a look at how far this landscape has evolved in regards to digitizing the physical store.
The integration of digital and physical experiences, known as “phygital,” is becoming increasingly prevalent in the retail and restaurant sectors. Mobile payments, loyalty apps, and mobile ordering are reshaping customer interactions, and they allow for the highest levels of personalized shopping experiences.
With 53% of Americans now preferring digital wallets for mobile payments and branded apps playing a central role in loyalty programs by enabling mobile couponing and ordering, consumer preferences are shifting toward digital platforms. When retailers aren’t providing their own digital setup within a store, customers must rely on their smart devices, which require either Wi-Fi connectivity or cellular data, both of which pose challenges. Ensuring seamless customer experiences hinges on adequate connectivity in the retail landscape.
Challenges With Wi-Fi
Wi-Fi connectivity presents challenges, including cumbersome login procedures and security vulnerabilities. Public Wi-Fi networks are often unencrypted, posing risks to sensitive data such as passwords and credit card information.
“With Wi-Fi, users have to search for the right network and enter personal information or accept long-winded terms and conditions before being granted access,” said Stephen Kowal, chief commercial officer at Nextivity. “They then need to repeat this process for each store or restaurant they enter. This is not a good customer experience, particularly in large retail and restaurant venues such as malls and food courts.”
An alternative approach to keeping shoppers connected is to use cellular signal boosters. These devices leverage outdoor cellular networks to deliver strong and dependable connectivity indoors. By addressing connectivity gaps with cellular signal boosters, businesses can pave the way for successful digital transformation, driving higher sales and fostering loyal customer relationships in the evolving landscape of phygital experiences.
However, it’s important to choose the right signal booster. Newer Active DAS Hybrid solutions offer reliable coverage, cost-effectiveness, and quicker setup compared to legacy distributed antenna systems (DAS), according to Kowal.
Phygital Trends
At the Retail Technology Show 2024, several tech trends were highlighted. RFID technology, while not new, continues to improve in affordability and efficiency. Companies like Mercaux showcased RFID applications in self-checkout and digital fitting rooms, focusing on genuine customer behavior rather than “more gimmicky or expensive alternatives like AR try-on mirrors.”
The potential for collecting data in physical retail environments is significant, yet implementation remains challenging. Companies like Refive and NewStore are making strides to bridge this gap by introducing innovative solutions.
Refive uses QR codes to establish digital touchpoints within stores. These codes allow customers to access information on promotions or receive digital receipts without needing to download an app or provide an email address at checkout. This technology not only tracks customer behavior in stores but also helps build customer profiles for personalized interactions.
NewStore enhances the in-store experience by enabling retailers to manage their operations through an iPhone. This includes functionalities like store fulfillment, clienteling, endless aisle, and mobile checkout services. The technology effectively transforms store associates into “living websites,” offering customers an optimized experience similar to what they enjoy online.
Scandit, a tech company that offers smart data capture software, demonstrated how digital devices can streamline store operations. Its technology enables quick barcode scanning for inventory management and order picking and uses AR to locate products or provide reviews and additional information. These innovations show promise in enhancing efficiency and customer experience in physical retail settings.
Examples of Phygital Implementation in the Past Few Years
Happy Moon’s Cafe, a Middle Eastern restaurant chain, leads the charge with its groundbreaking 3D menus, allowing customers to visualize menu items with augmented reality before ordering. Meanwhile, Zara’s innovative Store Mode feature on its app empowers shoppers with real-time inventory tracking and convenient in-store navigation, streamlining the shopping experience.
Ralph Lauren addresses authenticity concerns by embedding QR codes in clothing items, providing customers with instant verification and styling tips. The Hover app utilizes machine learning to transform simple photos into detailed 3D models, helping customers visualize remodeling and DIY projects with precision.
Nordstrom continues to support live video shopping, offering immersive experiences where customers can interact with products and make purchases directly from themed livestreams. Finally, Rose City Goods integrates QR code shopping into its interactive window displays, allowing passersby to seamlessly shop for items showcased in the storefront without setting foot inside the store.
As retailers continue to blur the lines between digital and physical realms, these innovative approaches pave the way for enhanced customer engagement and convenience in the ever-evolving world of retail.
Discussion Questions
How has the concept of a phygital retail future evolved since 2022, and what are the significant advancements or challenges faced in digitizing the physical store?
In what ways do mobile payments, loyalty apps, and mobile ordering reshape customer interactions in the retail and restaurant sectors, and how crucial is robust connectivity in facilitating these digital experiences?
How do solutions like Refive and NewStore integrate data collection in physical retail settings with digital strategies, and what impact do they have on enhancing customer experiences and operational efficiency for retailers?
Poll
Loading …BrainTrust
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
Bob Amster
Principal, Retail Technology Group
Doug Garnett
President, Protonik
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I’m all for digital innovations, but let’s ensure we get the basics – like tidying fixtures – right first. Digital bells and whistles amount to very little if the underlying business is not sound.
That said, there are many useful technologies out there. The challenge isn’t a lack of ideas, it’s having to pick and choose the best and most meaningful solutions. The two golden rules here are don’t overwhelm consumers with gimmicks, and don’t creep them out with unnecessary data collection. For what it’s worth, my focus would be on digital tools that improve efficiency and the customer experience: within this I think RFID solves a lot of issues from shrink, to inventory management, to providing reliable views of stock for online pickup.
When digital was first introduced into stores as part of the “phygital” concept, it tended to align more with entertaining the customer than it did create efficiencies for them while shopping. I’m happy that the intention behind tech in stores has evolved to drive efficiencies for customers, but there’s still a long way to go there. For example, when visiting a retailer recently, the inventory being below the salesfloor, taken by associates to shoppers once in the dressing room when ready to try-on creating an extremely long wait for everyone involved. Similarly, we continue to see slow-downs due to self-checkout technology. The intentions are more correctly guided these days, but they’re not allowing for the most seamless omnichannel experiences just yet.
The best digital experiences in-store are the ones where the technology seamlessly disappears into the background so the customer doesn’t even realize it’s there. When th technology is so front and center, it runs the risk of making the experience be about the tech rather than the merchandise. Yes, there are many aspects of the in-stor experience that could be enhanced with AR and other technologies, but when speaking with retailers I also remind them of one important factor – scale. Meaning, can the experience scale beyond 1 customer? How about 5? or 10? Does anyone remember how bluetooth beacons were supposed to revolutionize the in-store experience and personalize it for every shopper? Except that after the novelty wore off, no one could figure out how to make it scale in a reliable way that worked for every customer al of the time.
The best digital experiences start by asking how the new technology will always enhance the shopping experience for the customer without requiring them to adopt something new or get in the way of the basic reason they are in the store to begin with – making a purchase! It’s often surprising to find just how much impact an indirect use of technology in the store can have on the overall customer experience. Especially if this is in support of retail fundamentals, without which, no one is going to enjoy the new, shiny, tech based experience. When done right, combining digital and physical delivers something unique that the customer can’t achieve with digital or physical alone. But can we please stop calling it “phygital”? It’s all just commerce!
Excellent point made in those first two paragraphs. The technology has to seem like a ho-hum to the customer.
This. Much like the Middle Schooler throwing the ragin’ kegger: it’s all good…until something goes wrong. Retailers aren’t techies; there’s much to be said for “sticking to your knitting”, and while there are, obviously, certain things (nearly) retailer has to offer, I think it’s folly – or at least peril – to try and make your competitive advantage a twenty-ninth way of paying.(or whatever). Rememeber that Macy*s became a leviathan as a “cash only” retailer (then they caught up, and …well…)
Sorry Craig, that is one retrograde, divorced from reality take.
Phygital is very logical at this stage in time. Consumers want to shop in brick-and-mortar stores as well as online. There is an increasing demand for flexibility to combine in-store shopping with e-commerce.
Some examples where Phygital retail can be applied are click-and-collect, in-store digital, QR codes, social media, pop-up stores, mobile, and other avenues as well.
Many brands will rely on physical retail in the future. According to BigCommerce, 35% of American consumers would shop more online if they could virtually try on or try out all products. -Db
While the average consumers is likely not thinking in terms of ‘phygital retail,’ its has seemlessly taken root in our everyday lives by turning mobile phones into the new point-of-purchase and transforming the way we shop.
Some areas like AR try-on and using QR codes to browse additional inventory are still novel to many consumers. But other phygital offerings have become near mainstream such as replacing menus with QR codes (thank you, Covid); or using last mile apps, like DoorDash or Instacart, to place a store order, send a human to pick up said order then deliver that purchase to your front door. Increasingly, consumers see mobile ordering, and the smartphone in general, as an integral part of shopping. But it’s important not to over think this and make it more extraodinary than consumers are ready for right now (hello, smart mirrors that punch up 30 tops and 15 pairs of shoes to go with a single pair of pants).
The world is indeed headed towards a phygital retail markeplace and easy to adopt technology like mobile wallets, mobile ordering and loyaty apps are leading the charge. In the very least, retailers should have equity in at least one of these spaces to ensure they are moving in the right direction for durable growth. Beyond that, I’d press pause on a major cap-ex project to build the worlds next smart mirror/data collector. There are plenty basic improvements that can be made at retail right now that can serve consumers better, like rotating out-dated inventory off the shelves in a timely manner.
I’m obviously biased because I am associated with a company whose existence is predicated on the seamless blurring of the lines between the physical and digital. I believe livestream shopping, shoppable video, shoppable videoconferencing and push-to-device (pushing products automagically to an audience to add to a cart) are very cool technologies that properly leveraged, can deliver real value. I also believe digital and physical commerce will continue to evolve until eventually, the blurring of the two will be truly seamless. However, I’ve always maintained that investing in tech for “tech’s sake” or to make up for or hide a poor business strategy is a bad idea and often a costly one so I agree with the general consensus that investing in the “phygital,” like investing in AI, must make good business sense.
The only person I’m not entirely on board with is Ricardo. I think that as long as terms like “Sober Curious” and “Bleisure” exist, we shold keep “Phygital.” Plus, no one ever sang, “Le’s get Sober Curious” but Olivia-Newton-John was revolutionary when she sang her prophetic tune, “Let’s Get Phygital.” (Couldn’t resist)
Let it be said that phygital retail has arrived at the industry. That said, there are segments in which more tech is good and where less technology and more presentation is good. There are no winners or losers because there is no race between retail segments.
Customers want to Explore + Experiment. Retailers need to Execute to that Expectation in order to give the customer the right Experience. And these days that means a lot more digital tools are needed to give the customer the shopping/buying Experience they Expect. Neil and Ricardo spell it out. Let’s not let digital tools take our eye off the ball of product, pricing and presentation. To the degree that digital tools elevate how the customer perceives and digests those merchandising fundamentals, great. I think this is still a crawl, walk, run scenario for different segments of retail to learn what tools and implementations work best for them. Food vs apparel vs home vs electronics. That doesn’t mean retailers have a leisurely calendar to work with. Malls and department stores are already a decade or two behind in their evolution. “Phygital” is just a one word way of saying, “C’mon…let’s get going already!”
Let me second Ricardo Belmar’s point. Phygital only works when it’s not phygital — when it not a PR move designed to be highly recognizable in the store experience. It matters only when a seamless addition that just makes sense.
Thus, 3D digital menus seem far too hard for me to want to engage with. Even using QR codes to bring up a menu on my phone is frustrating — so I avoid restaurants who require me to do this.
Where does it offer significant value to the customer? That’s where it should be used…without customer fanfare but simply as a good thing.
In 2022, retailers and luxury brands invested in digital to target always-on Gen Zs through the metaverse and gamified shopping on Roblox. In 2024, retailers bring digital efficiency and personalization into stores with innovations like digital kiosks and smart fitting rooms.
Digitizing the store is expensive. Retailers want reassurance that their tech investments will be interoperable and flexible to adapt as their needs change over the long term.
The retail, restaurant and sports and entertainment sectors are leaders in adopting a mobile-first mentality. Mobile pay, apps, ordering and ticketing shift consumer habits to their smartphones.
It’s called Unified Commerce. It’s table stakes and the term “phygital” is a crime againsty humanity,
The concept of a phygital retail future has significantly progressed since 2022. Mobile payments, loyalty apps, and mobile ordering have transformed how customers interact with stores for faster and more personalized shopping experiences. However, reliable connectivity is crucial, as poor Wi-Fi or cellular networks can disrupt these digital interactions.
Solutions like Refive’s QR codes are creating seamless digital touchpoints within stores, while NewStore’s iPhone-based management system are enhancing the store operations. These technologies not only streamline customer experiences but also enable retailers to collect and utilize data more effectively. This integration of digital strategies in physical settings boosts customer satisfaction and operational efficiency, making shopping more engaging and efficient.