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The future of ‘phygital’ retail experiences: A strategic CX guide

360 Magazine 
in Print


The future of ‘phygital’ retail experiences: A strategic CX guide

phygital customer experiences

When someone talks about a physical retail experience, most people will know what you mean: walking down aisles, picking things up on shelves and chatting with store associates.

Over the past two years we’ve all become more familiar with digital retail experiences, whether it be mobile apps or simply using a brand’s e-commerce capabilities to make a purchase.

The definition of “phygital,” however, many be less clear-cut — perhaps because it is still evolving at a time when many retailers are trying to figure out what their customers will need in terms of connecting in-store and digital touchpoints.

For Jane Cannon, chief retail strategy officer at omnichannel software provider NewStore, the best way to evaluate the success of a “phygital” retail experience is simple: customers should never think of it as one.

“My tagline has always been that consumers are really not looking to shop a channel. They’re looking to shop brands,” Cannon told 360 Magazine. “The best thing that happened in the pandemic was that consumers are now expecting all the walls to get broken down and allow those channels to interoperate.”

This can include options to buy online and then pick up in store (BOPIS), though Cannon describes those as table stakes today. In fact, figuring out the full scope of phygital opportunities could prove daunting for retailers. According to Mada Seghete, cofounder and CMO of mobile attribution platform Branch, that’s why they could come back to a core CX principle: focusing on what will provide real value to customers.

“It’s important to remember that for many of these brands, mobile apps are extremely important, but still just one part of a much broader relationship,” Seghete said. “The more that the digital part of this relationship can save time, make a shopping experience more relevant, or help the consumer complete a task that otherwise would have required more steps or even a trip to a physical store, the better.”

Starting In-Store

Phygital experience design could also start with ensuring customers simply aren’t disappointed. Rob Belcore is chief customer officer at RSA America, which provides marketing services and technology to independent grocers. He pointed out that out of stock items were an immense challenge for a number of retailers during the height of COVID and many grocers got crushed by the increase in online demand. 

“Through no fault of their own they were providing — not a bad online experience, but an incomplete customer experience,” he said. “There were far too many replacements and too many out of stock items all together.  Customers expectations as they return to stores is to not have this problem. They want to take back control of their shopping experience as it comes to the individual item.”

As they scramble to find more procurement sources, Belcore advised beginning integration of consumer technology with what happens in the store first. That means ensuring operation teams figure out from the ground up how the technology is going to be executed and how staff will be involved.

Identifying the right success metrics at the outset is also important, said Jonathan Yaffe, co-founder and CEO of experience relationship management platform AnyRoad.

“We’ve seen a prominent U.S. retailer create immersive in-store experiences for millions of their customers and then try to measure how many of them buy a product that same day. This is a huge lapse in vision!” he said. “We helped that retailer change their KPI from ‘conversion’ to Customer Lifetime Value. Now, they run millions of experiences both in real life and online and are able to track the increase to CLTV, resulting in an experiential ROI of billions of dollars.”

The rise of QR codes and the evolution of the UPC

As several retail experts interviewed for this article pointed out, the most common approach to phygital retail since the outbreak of COVID-19 has been the increased usage and acceptance of QR codes. Beyond that, standards are evolving quickly to help enhance retailer’s phygital capabilities.

For example, the GS1 Digital Link standard gives brands the ability to web-enable barcodes, connecting the physical product to the web while providing consumers with instantly updated and brand-authorized content online. This could include ingredients, product safety and other information via a single smartphone scan.

Melanie Nuce, GS1 U.S.’s senior vice-president of innovation and partnerships, said a project is now underway to transition from linear Universal Product Codes (U.P.C.) to data-rich 2D barcodes on product packaging by 2027. This will allow retailers to convey limitless information in a machine-readable format. Such advancements are important given the rise of connected online and in-store experiences made possible by the Internet of Things, she said. It also represents a big change, given UPCs have been in use for more than five decades.  

“The first question we tend to get is, ‘What’s the next 50 year solution?” Nuce said. “The truth is there’s probably not just going to be another 50-year solution, because the technology and customer needs keep evolving.”

Where phygital retail and the metaverse will meet

Consumers have gotten so used to scanning QR codes for menus or information that it has greatly reduced the education required to launch more advanced augmented reality (AR) campaigns in retail, said Jason Yim, CEO and executive creative director of Trigger XR. That means QR and other scanning codes can be integrated into point-of-sale, shelving and even on the product itself and retailers can still reasonably expect the audience will know what to do without further messaging and instructions.

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This sets the stage for a highly dynamic range of phygital experiences that could be deployed within stores or even within more immersive digital experiences such as the metaverse. Some of Yim’s examples included a sizing avatar shoppers could take from store to store to try items on, or the ability to scan your office or room and launch a pop-up store that’s tailored fit into your space. 

New technology like volumetric capture, meanwhile, makes formerly expensive and time-consuming 3D modeling much easier than before, Yim added, which can make the shopping experience hyper-personalized and more magical.

“AR and VR do such a great job of making the shopper the star of their own story,” he said. “Imagine being a bride and going shopping for a wedding dress, but being able to use VR to picture yourself wearing that dress while walking down the aisle.”

Object comprehension is also getting much better, Yim added, which means that consumers are going to be able to have all sorts of information at their fingertips. “Imagine going back-to-school shopping and seeing a backpack your child likes and then being able to instantaneously see product reviews by holding up your phone,” he said. “Now what if the customer could also see that the price of that backpack was cheaper at a competitor’s store?”

Phygital experiences can come with data management challenges, of course —Seghete said it can be very difficult to combine offline signals with digital data in a way that allows meaningful analysis about what is working. Sharat Potharaju, CEO of QR tech firm, Beaconstac, also said there are still ongoing concerns about what data is being collected when a user scans the QR code.

“What’s important is that as data technology evolves, businesses and technology vendors continue to work together to ensure consumers are privy to what data is being captured and what it’s being used for so that businesses can continue to leverage phygital resources,” he said.

As with any CX initiative, phygital transformations also need to be assessed to ensure retailers are seeing the right return on investment (ROI). RSA America’s Belcore said the best metrics are increased foot traffic, increased sales and increased gross profit.

“Phygital done correctly does these three things. Avoid the smoke and mirror metrics of reach, impressions, clicks, and more,” he advised. “If you cannot directly tie your phygital to these major metrics within 12 months either your

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