Phygital Retail: Combining In-Store and Digital Shopping

By Dr. Cynthia Silvia  |  06/06/2024

The retail industry is evolving at an incredible pace. To compete with online shopping, retailers must use innovative approaches to create a seamless, engaging, and convenient shopping experience. Everything from store design and layout to security and privacy has undergone an overhaul in recent years, and more businesses are adopting phygital retail to attract customers.

What Is Phygital Retail?

Phygital retail has reshaped the retail industry. It blends the brick-and-mortar and digital shopping experience with a seamless and immersive blend of virtual reality, augmented reality (AR), and artificial intelligence (AI) technology, according to Diya Bag of CommerceTools.

Phygital retail recognizes that consumers move back and forth between digital and in-person shopping. It blends multiple touchpoints into a multichannel experience and eliminates the need for consumers to stand in long lines.

One of the drawbacks of shopping during the busy holiday season is the risk of being out of stock. The phygital retail experience allows consumers to make informed decisions online, reducing the chances of consumers encountering sold-out items while visiting a brick-and-mortar store.

Many consumers enjoy self-checkout online, which addresses the demand for contactless transactions and shorter wait times. Self-checkout also allows customers to complete transactions at their own pace.

Customers also like having access to in-store mobile apps as a way to access discounts, compare prices, read product reviews and search for specific items. These apps also allow retailers to collect useful data such as customer habits and shopping preferences, allowing retailers to better target their marketing efforts.

BOPIS Increasing in Popularity

Phygital retail combines the physical and digital worlds into a unique shopping experience. A perfect example is the “buy online and pick up in store” (BOPIS) experience that became popular during the COVID-19 pandemic, notes Zahava Dalian-Kaptzan of Bringg.

In fact, BOPIS increased by 554% in 2020, according to Digital Commerce 360. Clearly, customers are enjoying the convenience and speed associated with this shopping model.

Amazon Go Retail Stores

Amazon Go® stores are another example of the phygital retail experience. Customers use their Amazon app to enter the store and move through the store, making their selections.

Store sensors automatically scan the selected items and add them to the digital cart on the app. If the customer returns an item to the shelf, it is removed from the digital cart.

When the customer is finished shopping, Amazon charges that customer’s account and sends a digital receipt to the customer’s records.

Sephora’s Virtual Try-On App

Another example of a phygital retail experience is Sephora’s virtual try-on app, which allows consumers to try different makeup products using augmented reality. Consumers can even take a photo of their face with their smartphone and upload a photo to see how they will look with the makeup.

If customers like the products they tried, they can buy purchase them and have them delivered to their home. Sephora ® also permits customers to pick up their purchases in a store.

Interactive Store Windows

Online shopping gives the consumer constant novelty. Traditional store windows, however, provide only a static experience.

As a result, in-store retailers have the challenge of engaging oversaturated customers and stopping them in their tracks. Now, they have a new tool: interactive window displays.

Clas Ohlson®, a Swedish home and hardware retailer, has mastered the art of interactive store windows. Consumers can control the window display using a smartphone, browse a store’s catalog, see current ads and even purchase from the store by walking past the store’s window.

Ombori®, a retail tech company, has also made a splash in the interactive window-shopping space, according to Anna Schivarien of Forbes. All customers have to do is walk past the window, and the screen comes to life.

By scanning a QR code, users can use their phones to browse and shop for the store’s products without ever entering the store. Also, when users interact with the store’s window display, it encourages other shoppers to take notice.

More retailers should consider interactive displays as they encourage consumers to shop online and in-store. Through their technology, Ombori turns the store into a shopping attraction where consumers become intrigued by the new technology, step inside the store, and explore.

Schivarien also notes that another advantage of interactive displays is that they can be used even when a retail store is closed. The displays add value by driving foot traffic and increasing sales. 

Augmented Reality: Another Variation on Phygital Retail

Augmented reality (AR) window displays provide excellent ways for retailers to interact with customers through advertisements and also drive brand awareness, according to Randy Ginsburg of Shopify. Most consumers are attracted to these visual displays as they help them envision how these products might look, making them easier to buy.

Similarly, PacSun® designed an augmented reality window display to advertise its products, showing a swimmer in the water. This type of display makes it easy for consumers to visualize using PacSun’s swimwear and other products.

IKEA® uses an augmented reality software app, called IKEA Place, that permits customers to shop online. It also allows customers to see how furniture will fit and look in their own home or office.

Virtual Fitting Rooms

Virtual fitting rooms are another new, popular technology that allows customers to try on clothing easily. According to Elise Dopson of Shopify, the global virtual fitting room market will increase from $4.03 billion in 2022 to 14.87 billion by 2029, virtual fitting room market will increase from $4.03 billion in 2022 to 14.87 billion by 2029, an annual growth rate of 13.44%.

This implementation of augmented reality allows the placement of an article of clothing over a living image of the customer. Consumers can easily check the size, style, and fit of a clothing product without actually putting it on.

Walmart® recently launched a “Be Your Own Model” app. Consumers upload a full-body image of themselves and see how the clothes look before making a purchase.

According to Dopson, there are also virtual fitting rooms that use augmented reality, artificial intelligence (AI)-powered algorithms, and machine learning to create a 3D model of the shopper in front of a webcam. The camera scans the shopper’s body and another type of virtual technology overlays products on the 3D model of the consumer. Customers can then see what they look like wearing a clothing item without physically trying it on.

Virtual Mirrors

Virtual mirrors are another form of phygital retail that has been found to increase store profits. New York clothing retailer Rebecca Minkoff found that 65% of visitors were more likely to place an order after interacting with AR technology displays in its store.

Brick-and-mortar retailers can use these virtual mirrors to their advantage as there is no need to dedicate retail space to changing rooms. Instead, they can use that space to create visual merchandising displays to showcase products.

Sustainability and Phygital Retail

Understanding climate change and sustainability should be central to digital marketing strategies – it is vital that brands communicate their sustainability efforts. How brands minimize waste and support the use of recyclable materials makes a difference as to where consumers shop.

Companies that “go green” are attractive to consumers. According to Mathew Broughton of ExchangeWire, 66% of all baby boomers and 68% of Gen-Z and millennials research how brands approach sustainability.

Searching online is the top method consumers use for identifying digital retailers’ sustainability, so retailers should pay attention to their websites’ search engine optimization (SEO). Retailers also must identify and use the social media channels that are the most beneficial for their unique brand messaging.

Brands must market to their customers throughout the year, not just during holidays. Ultimately, retailers must ensure that their marketing strategies appeal to shoppers’ core values as they merge the online and offline customer experience.

The Security and Privacy Concerns of Phygital Retail

Brands that use phygital retail technology allow consumers to customize their shopping experience. But the use of digital technology raises concerns about maintaining data security and privacy, according to ContactPigeon.

Taras Kret of Eleks says that retailers must ensure that their data security and privacy policies are readily available to consumers. Transparency must be a top priority for retailers when it comes to collecting customer data and usage policies. They also must ensure that these practices comply with current laws and regulations.

Threat intelligence notes that there are various methods for retailers to protect their cybersecurity. They include:

• Data encryption
• Network segmentation
• Identity verification
• Access management
• Security program automation 

The Future of Phygital Retail

Shoppers have come to expect retail to be constantly accessible, and phygital retail certainly aligns with consumer expectations. According to A. Roy and Rupesh Badam of Qentelli, phygital retail is changing the retail customer experience. It focuses on immediacy, immersion, and interaction, and we can expect more retailers to use phygital retail as retailers come up with more creative ways to use technology to satisfy consumer needs.

The Retail Management Degree at American Military University

American Military University (AMU) offers an online bachelor's degree in retail management for students looking to seek opportunities in the competitive retail industry. This degree is ideal for adult learners aiming to gain a comprehensive understanding of retail management strategies.

The program offers a convenient online format, allowing students to balance their studies with personal and professional commitments. Experienced faculty members, who bring real-world knowledge and expertise to the online classroom, guide students through the coursework and ensure they are well prepared for the challenges of the retail sector.

Course objectives focus on equipping students with the skills needed to formulate effective retail strategies, manage inventory, and innovate within the industry. Students have the chance to learn to diagnose competitive positions, implement successful retail operations, and understand consumer behavior to create value for customers and stakeholders.

Throughout the program, students will participate in various activities, such as analyzing retail strategies, managing retail inventory, and exploring innovative retail concepts. These hands-on experiences ensure that students will have the potential to make meaningful contributions to the retail industry. 

Amazon Go is a registered trademark of Amazon Technologies, Inc.
Sephora is a registered trademark of Sephora.
Clas Ohlson is a registered trademark of Clas Ohlson, Ltd.
Ombori is a registered trademark of Ombori Group, Ltd.
PacSun is a registered trademark of Pacific Sunware of California, LLC.
IKEA is a registered trademark of InterIKEA Systems, B.V.
Walmart is a registered trademark of Wal-Mart Stores, Inc.