lets get phygital

In the wake of the pandemic, the lines between physical and virtual customer experience are breaking down. What does this mean for businesses?

We are entering an era when the dividing lines between physical and digital customer experiences are beginning to become a lot less distinct. For many years, customer-facing businesses have been developing omnichannel strategies but in the wake of the pandemic, the new buzzword is “phygital.”  In practice, the embrace of a physical/digital fusion will result in businesses providing their customers with ever more relevant and personalised services. 

At first glance, you might argue that the term “phygital” is simply a rebranding of the familiar omnichannel concept. In both the retail and the business-to-business sectors, vendors have long since realised that their customers want to interact with them – at any given time – in a channel of their choosing. The omnichannel approach sets out to provide a unified customer experience across all the available channels.  

A phygital strategy takes this further. Rather than simply providing a joined-up customer experience in terms of the facility to buy and access customer service across apps, websites, call centres and physical stores, the phygital approach introduces a much greater degree of interaction, interplay and overlap between channels during the customer journey. 

To take just one example.  A customer might order a product online and opt to pick it up at a physical store. So far, so omni channel. But what if the same customer has also used augmented or virtual reality to “test drive” the item before making a purchase? It then becomes more difficult to define the customer journey in terms of physical or digital channels [Forbes 2022]. The same might be said if an in-store customer uses an interactive billboard within a store and orders a product using a QR code. 

That’s where we are today. In the not-too-distant future, the arrival of a workable metaverse with mass-market appeal will provide more opportunities for phygital innovation. 

Pandemic Changes

The pandemic changed the way that consumers interact with retailers and other vendors. At the height of the Covid crisis, stores and other physical outlets were closed across much of the world. Retailers responded – and kept themselves in business – by focusing on engaging their customers through digital channels. The immediate result was an upturn in online sales and a significantly expanded market for home delivery services. There was innovation too – for instance, experimentation with subscription services and more trading via social media. 

Thanks to vaccines and natural immunity, the worst of the Covid crisis is behind us, but customer behaviour and expectations have changed. Collectively, consumers sighed with relief when stores, restaurants and bars reopened. But a rubicon had been crossed. The sheer convenience of buying online had been underlined by the experience of lockdown. Yes, consumers wanted personalised one-to-one interaction but they were also keen on using digital channels.  

Present: The Zero Consumer

So, brands faced a challenge. Physical stores have always played a key role in the branding of omnichannel businesses. If consumers spend less time in shopping centres and high streets and more time online, the question is, how do you build relationships and brand loyalty? 

This is a particular conundrum in the age of the so-called “zero consumer.”  These are people who are omnichannel shoppers but crucially, they have very little brand loyalty [McKinsey 2023]. Thus, attracting and holding their attention can be difficult.  

Four recommendations are often made, namely: ramping up the omnichannel offer; revamping personalisation, rethinking the retail proposition and taking steps to demonstrably improve the societal footprint of the company [McKinsey 2023].

Phygital retailing helps address at least three of these recommendations while also playing into customer desire for convenience coupled with a personalised or memorable experience. 

For example, instore kiosks of the sort introduced by McDonald’s, allow customers to place their orders using a touch screen and, thus, avoid queues at counters. In terms of the phygital proposition, the customer is in a restaurant but also enjoying digital convenience. Kiosks and interactive billboards can also enable personalisation strategies because the interaction is digital and allows data to be collected. In terms of customer experience, Kiosks can do a lot of heavy lifting, ranging from providing in-store information and ordering and payment to direct links to contact centres.  

AR and VR provide another means to blur the digital/physical divide. For customers at home, VR offers a chance to explore a product and what it has to offer before making a purchase. In stores, VR displays provide a means to surprise and delight the consumer.

Into the Metaverse   

These developments are pointers to a more radical future. We’re not quite there yet, but a lot of work is being done to create working models for a time in which the “metaverse” concept will merge physical and virtual realities in a way that is much more profound than what we see today.  

Thanks to the marketing skills of Mark Zuckerberg, a huge amount has been written about his company, Mata’s plans for an immersive 3-D world in which we – via avatars – work, rest, play and shop. Its launch is probably several years away but smaller digital universes already exist, offered by – amongst others – gaming platforms, training companies and the creators of digital twins. 

What will this mean for retailers?  Well in a metaverse – which could be augmented or virtual reality – digital products can be bought or sold using blockchain currency. These products could be in the shape of non-fungible tokens (NFTs), which are already widely traded.  But what will this mean for conventional retailers? 

Well, the metaverse will become a space in which sellers and buyers interact with each other. These new community spaces provided an opportunity for sellers to interact with customers, offer incentives and build communities [Forbes 2023].   The incentives may be physical or virtual – in the form of NFTs.

The building blocks for the phygital future are already in place. Now is a time for retailers and other sellers to innovate.