Retail Phygital: The latest big paradigm shift
The pandemic has impacted many sectors, including retail. It has made it clear that shops must reinvent themselves or die and, when talking about the future of retail, one concept has been repeated in recent times: phygital retailing.
The coronavirus, as we say, has changed the direction of the market, for example by introducing new consumer habits and the relationship between customers and brands. In this sense, the integration of the physical and digital worlds has become the cornerstone of an industry that sees itself as fully capable of offering unique and integrated experiences across channels to satisfy customers who are increasingly hungry for innovation and personalisation of their shopping experiences.
How has retail adapted to a fully connected world, what is the state of the relationship between traditional retailer and e-commerce, and what is the future impact of phygital? We talk about all this and much more in the following lines.
Retail design, together with the phygital experience, has achieved its goal: that e-commerce does not absorb the entire market.
Retail design to avoid losing business to eCommerce
Physical shopping fell below 50% in 2020 because of the pandemic. And in fact, at present, the most recent data confirms the rise and establishment of e-commerce in Spain, with more than 70% of the population making online purchases. Especially in those segments where there is the option of purchasing products both in a physical shop and online.
After an initial period of doubt, fear and uncertainty, retail design has achieved its objective: that e-commerce does not absorb the entire market. Thanks to it, shops are maintaining and even increasing their presence in person. Interior design allows a customer/brand interaction in a physical environment that is a differential experience compared to e-Commerce. And in this field, phygital has a lot to say when it comes to supporting a retail design that, supported by the omnichannel strategy of the shops, ends up generating all those sensations that cannot be obtained through the screen.
Phygital shopping: the evolution of a physical experience that will never go away
Going from customers adapting to you to you having to do it not with a typical customer, but with each individual consumer looking for their own personal ‘adventure’, their own personalised experience, is a paradigm shift that is very impactful. But the truth is that the retail sector has been able to adapt to this global trend that has been catapulted by the Covid-19 pandemic.
Following the digitisation of the retail sector, the emergence of digital platforms and the total rise of e-commerce, the convenience factor has been won hands down by commerce 3.0 over traditional retailers. But from what seemed to be a prediction of disappearance, we have now moved on to a convergent and total response in which the digital shop talks to the physical shop on a one-to-one basis. From competition to coexistence. The ‘Phygital’ space.
Phygital is therefore the place where the physical and the digital converge, being able to have a 100% physical shopping experience as it has been done all our lives but with all the advantages of a digital process: virtual viewing, fitting room reservations, other payment methods, without the need for interaction with the shop staff, or even asking the physical shop to send the product to your home.
What does this mean?
The customer now controls when and how they want to interact with the shop. And it is in the hands of the retailer to give them this on a plate, without friction or wasted time, giving them more reasons to leave the house and go to the shop than out of pure necessity.
Here, one of the great challenges for the retail sector is to be everywhere, allowing freedom of shopping and hyper-personalising the experience with services and products adapted to the consumer’s tastes. To do this, it is obliged to know the person who goes to its establishment. How can it do this? With data-based technologies, Big Data, artificial intelligence… And this is another trend, like sustainability, which is already unstoppable in the industry.
75% of retailers bet on phygital experience, according to the latest Adyen Retail 2022 report.
3 out of 4 retailers are committed to phygital experience
Neither exclusively online nor exclusively physical. Consumers no longer (only) want to live different experiences when shopping, they want a unified model and that is phydigital shopping, hence 75% of retailers are committed to the phygital experience. This is the main conclusion of the recent Adyen Retail 2022 Report, which delves into the digitalisation and expansion plans of retailers in Spain.
Although only 6% of Spanish retailers have unified physical and digital channels, a large majority believe that the future lies in offering a phygital experience. Thus, 34% of Spanish retailers have a formal digitalisation strategy, while 27% are in the planning stage.
In this sense, the aim is to respond to new consumer demands. In 2022, 40% of users prefer to make their purchases in the physical shop, while 32% opt for shopping on websites or marketplaces and 16% through apps. At the same time, more and more consumers are making use of social networks for shopping, a figure that this report puts at 12%.
How can this be put into practice? Without going any further, when it comes to shopping, the customer can both make their purchases from home, online and pick them up in the shop, or buy them physically and decide to have them delivered to their home address, retrieve the “online shopping cart” in the shop itself that they have already started from another place and even, from the fitting room itself, decide which new garments they want to include and which to remove and finally pay for them there and then.
In other words: according to the Adyen report, 6 out of 10 consumers prefer a unified retail experience, so consumer habits are now leaning towards the importance of both channels as customers seek greater flexibility and choice in where they shop. The study makes it clear that consumers are slowly returning to physical shops, but what they really crave is more flexibility and choice in their shopping.
What innovations are expected for phygital retail?
CAAD recently spoke to you about new technologies and innovative trends in phygital retail, such as the adaptation to new in-store technologies for logistics and product display, artificial intelligence, the use of drones or apps for shop management. In this field, we can add from the aforementioned study that Spanish retailers are focusing their innovations above all on logistics and stock management. One in two retailers are also redoubling their efforts to optimise their marketing and social networks, while 42% are doing so in customer services. These are areas where technology can be a major differentiator.
In integrating the best of the physical and digital worlds, we must also add the new and booming payment methods preferred by consumers, offer digital channels of participation for your customers from the shop itself and boost sales through new social and digital channels without leaving the physical shop.
This is the case of technologies such as digital twins, which allow us to recreate a garment and try it on using augmented reality and/or virtual reality.