New Retail: Phygitalize your boutiques!

Phygital is more than a trend – it is the future of retail

What is phygital? This buzzword combines the words physical and digital to describe the synergies between physical stores and the digital technologies that smooth the customer journey. Digitalizing the in-store experience is a significant challenge for luxury retailers to appeal to more digitally savvy customers. But it is also a must to enable unified commerce.

Although several luxury retailers have strengthened their e-commerce strategy over the years, the number one touchpoint in luxury remains the boutique. In 2020, according to Statista⁽¹⁾, 75% of luxury spending still took place in-store, making it the most important sales channel for luxury. Seeing the products in real life becomes more critical with higher prices, but also, a quality sales service makes boutiques indispensable. No matter the strength of an in-store experience, there are many points for improvement. The truth is, who wants to buy a new watch or handbag in an old-school dusty boutique? Retail needs to evolve and modernize while maintaining prestige, and phygital is the solution. 

  
From email, QR codes, virtual reality (VR), artificial intelligence (AI), geofencing to cookies, the list of digital tools and technologies is long. The need to go phygital applies to all kinds of retailers, from luxury to more affordable shops. So far, the big players have primarily made a move, but small retailers are also increasingly adapting to the trend.

Let’s take a look at some best practices

The fashion brand Guess has partnered with Alibaba to pilot a Hongkong-based store set up with AI and smart mirrors. Customers can check in using facial recognition, enabling a smoother journey as customer profiles are analyzed instantly. Once a customer picks up clothes from a rack, a smart mirror next to the items recognizes the action, displays the product and its details, and even suggests a complete outfit based on the shopper’s purchase history. The shopper can then select the preferred items via the smart mirrors so that salespeople can prepare them in the fitting room for trying on later.

Another striking example comes from Coty and its brands Sally Hansen, Kylie Cosmetics and Covergirl. Customers of these brands can scan QR codes on the product shelves to access an AR-enabled app and other social channels, which enable trying-on the beauty products without even applying them. Both Guess and Coty demonstrate how technologies can enhance a smoother customer journey.

Phygital can even go beyond a more digital in-store experience by enabling retailtainment (retail + entertainment), another trend that highlights the need for creating a unique experience, especially for younger generations. While phygital describes the use of digital technologies in physical environments, entertainment can but does not have to be part of it. Burberry provides the ideal example of combining phygital and retailtainment with their first social retail boutique in Shenzhen, China. A dedicated WeChat program enables customers to navigate the store, make appointments and scan QR codes for more product and collection details. The program further gamifies the shopping experience as customers can create and evolve an animal avatar to move around the store by simply creating user-generated content (UGC). 
  

  
Smaller retailers can also apply simpler but widely used phygital elements into their boutiques as in-store screens. These so-called digital kiosks enable customers to search for more product details, check the inventory and order items online that are out of stock or even customize products. The digital screens offer an omnichannel solution for retailers to create a transversal customers journey across the available channels and improve the in-store experience by decreasing waiting times.

The benefits for the retailer?

Another strength of phygital is the possibility of data collection and data usage. Several in-store technologies such as digital screens enable the collection of names, email addresses, and other relevant customer data to enlarge a retailer’s knowledge of its customers. These details are important for growing the omnichannel customer base and applying the data for future customized user experiences.

Gathering customer data is even more valuable when understanding how to use it. The right equipment, software and training of the salesforce can enable a data-enhanced and personalized in-store experience. By pulling up customer profiles, sales employees can adapt their service and create tailored experiences in real-time, such as activating personalized messages on a digital kiosk or screen. No matter how phygital stores get, the sales team still plays a major role in the journey.

Overall, phygital enhances the customer journey through virtual showrooming, personalized services, and bringing retailtainment to customer experiences and enables retailers to gather data and knowledge, which strengthens brand loyalty in the long run.

^{1) Online personal luxury goods market - statistics & facts, published by Statista Research Department, August 2021.}