Phygital: How digital commerce is blending with physical retail

One of the most interesting retail experiences I’ve had of late was visiting an Amazon Go store while on a business trip to New York City.

Like everyone in CPG, I had been reading lots about Amazon Go and its ‘Just Walk Out’ tech (which is now also rolling out to Whole Foods Market stores), but I wanted to see it for myself. And I have to say: It really does make for a remarkable shopping experience when you try it.

You enter the store with a QR code, which is used to connect any purchases you make to your Amazon account. Once inside, the store is essentially a convenience store, offering snacks, lunch options, sodas, and a small range of health and beauty products. You pick what you need and walk out of the door – done. There’s no checkout line, making the experience incredibly easy and seamless.

Amazon Go is just one example of how digital technology is blending with physical retail to create new and better experiences for shoppers. The trend, which is sometimes referred to as ‘phygital’ retail, reflects the insight that there is no such thing as an ‘online shopper’ and an ‘in-store shopper’ anymore.

A shopper is just a shopper

In 2022, a shopper is just a shopper, and they’re interacting with both worlds. Online habits influence in-store purchases, and physical objects (including grocery products) are increasingly used to trigger digital experiences.

In all this, brick-and-mortar locations remain very important, as shoppers value the ability to physically see and touch products, even if they ultimately end up buying them online. As we’ve highlighted previously, between 60 and 70% of US consumers are now omnichannel shoppers, meaning they shop and/or research purchases both in store and online.

In a world where physical stores continue to be important but online sales are also growing, retailers do, however, need to maximize the efficiency of the in-store experience. This is what Amazon Go does brilliantly. Its blend of physical and digital creates a store that in many ways still looks and feels like a traditional grocery store but is much more efficient.

The opportunity to enhance physical retail through virtual and augmented reality technology is also huge. There is already some exciting work happening in this area, and I look forward to seeing more retailers and CPGs leverage new tech to forge deeper, more meaningful relationships with shoppers.

It’s a fast-moving area, of course, so testing and learning will be key. This is not the time for brand owners or retailers to put all their eggs in one technology’s basket. Thankfully, there is plenty of inspiration around. Amazon Go aside, here are five other examples of ‘phygital’ retail that I’m following with great interest.

5 examples of ‘phygital’ retail in action

1. Freshippo supermarkets by Alibaba Group: “Pick up a lobster, scan the barcode, and the supermarket app instantly provides a rundown on where it came from, when it was sourced and even a digital certificate proving it was organically farmed.” That’s how one reviewer describes the dazzling, futuristic experience of shopping at Freshippo, the chain of supermarkets run by Chinese eCommerce giant Alibaba Group. Each store is kitted out with cutting-edge tech blending physical and digital retail, and customers can choose to complete their shops entirely via an app or interact with store staff and physical products “in the traditional way”. Stores also double up as fulfillment centers, offering rapid grocery delivery to the local area.
2. Walgreens digital cooler doors: Walgreens’ digital cooler doors are one of the most talked-about examples of ‘phygital’ retail in the US right now. Deployed in partnership with tech company Cooler Screens, the doors display digital images of what’s on the physical shelf along with product information, prices, and advertisements. The move hasn’t been without controversy, but it’s a fascinating test case of how digital technology can transform the physical in-store environment and open up new opportunities for engaging shoppers. Other major retailers are also starting to test these screens now. If you’re in CPG, this is one to keep a very close eye on.
3. Snapchat AR lenses and Snap codes: For ‘phygital’ with a social commerce edge, look no further than Snapchat. Snap Inc. has been upping its game on commerce for some time, developing AR tools such as filters and lenses that allow consumers to interact with product catalogs and try on products virtually. By adding Snapchat QR codes to grocery packs, brand owners can also leverage physical products to create interactive digital experiences. CPGs that have done this to great effect include Unilever, which marked the 25^th anniversary of its Lynx brand in the UK by using on-pack Snapcodes to take shoppers to a time-travel portal back to the 90s.
4. Marks & Spencer AR store navigation app: UK retailer M&S is bringing a digital slant to its in-store experience by trialing an interactive store map that helps shoppers navigate the aisles and find the products they’re looking for. Using augmented reality technology, the List & Go app displays digital markers over real-life shelves and points to product locations. It also identifies the fastest route to reach items. M&S says customers are increasingly embracing digital, interactive shopping, and List & Go is part of its efforts to “test and learn” new technology that could improve shopper experience.
5. Swigr AR app for alcoholic beverages: Swigr is an augmented reality app developed specifically for the alcoholic beverages industry. It enables brands to use physical cans and bottles to trigger immersive digital experiences for consumers and tell their brand stories in playful ways. This includes ‘Beer Invaders’, a version of the Space Invaders arcade game using gamified beer cans. The app also supports eCommerce functionality, including ‘buy now’ buttons to encourage impulse purchases.