How Phygital Retail is Reshaping the Industry

Where does the future of retail lie? Given that high streets are on their way out — admittedly this has been the case for a number of years now — how do they stay relevant and required in today’s economy? According to McKinsey & Company, it lies in a blended approach that seamlessly merges the digital and physical worlds, which is where Phygital Retail comes in — combining the best of both worlds to create an integrated, seamless shopping experience.

The Case for Keeping Physical Stores Alive

Online shopping might be more convenient, but it hasn’t made in-store experiences obsolete. A study by the International Council of Shopping Centres found that 69% of consumers still prefer to purchase products in-store. Crucially, 61% said they’d visit physical locations more often if they offered interactive experiences, according to Mood Media.

That’s the sweet spot phygital is aiming for… not replacing the store, but augmenting it. Using AR, mobile commerce, and AI-driven personalisation, retailers like Nike, Adidas, and Zara are building spaces where customers can try on clothes virtually, receive tailored recommendations, and make purchases via mobile apps without ever queuing up.

The Rise of Phygital Retail Experiences

Nike’s New York flagship is one of the strongest examples of this retail evolution. ‘Scan to Try’ enables shoppers to scan an item and have it brought directly to a fitting room. A code on an in-store mannequin lets customers instantly shop the entire look. And with ‘Instant Checkout’, purchases can be completed through the Nike App — no tills, no lines, no friction.

This is UX-led thinking. By removing the traditional points of pain, Nike is setting a new standard for what shoppers expect in a premium in-store experience.

Physical stores provide a brand experience that cannot be replicated online, as it allows retailers to create a unique shopping experience, balancing excitement and convenience. For example, Gymshark, a popular activewear brand, opened its first physical store in 2022, offering workout areas and an in-house juice bar. This immersive experience makes the store more than just a vessel for purchasing products; it’s a one-stop-shop for everything the brand has to offer, a destination that is sought after and creates a cutting-edge experience. Shoppers will flock to the store to try a new work out and then be influenced to buy stock on their way out.

This is part of the reason ‘Pop-up’ stores are so successful. Glossier’s 2019 London pop-up in Covent Garden is a perfect example of how successful pop-up shops can be — in this case, it eventually led Glossier to turn it into a permanent fixture. The emphasis on experience is a top priority for Glossier, which resonates strongly with contemporary shoppers.

Sharing on socials sits at the brand’s core which is fuelled by the immersive experience of its showrooms in the newly established permanent store. Showrooms boast immaculate designs, consistently showcasing the brand’s signature pink colour scheme, and are filled with flowers and mirrors for the perfect selfie. The brand caters to the Instagram generation by generating publicity, increasing social media engagement, and encouraging customers to visit the store instead of shopping online.

Reinvent or Risk Irrelevance

Luxury brands like Chanel, Céline, Hermes and Dior have taken a different approach to the retail landscape. They still require customers to visit their physical stores to purchase most of their products, creating an air of exclusivity and luxury that cannot be found elsewhere. Chanel employs a strategy of limiting the availability of their products to in-store purchases, while using their website as a platform to showcase their offerings and encourage customers to visit their brick-and-mortar stores.

This approach helps to maintain the luxurious and distinctive experience that sets the brand apart, while also preserving a sense of rarity and desirability. Similarly, Céline, Hermes, and Dior require that customers visit their physical stores to purchase most, if not all, of their clothes and handbags, just as they did thirty years ago. However, these luxury brands do sell cosmetics, perfumes, and eyewear online. They have partnered with luxury online giants Farfetch and Net-a-Porter to sell these products to a wider audience online, allowing them to maintain their exclusivity for their fashion items while still reaching a more people through their online presence.

As the retail industry evolves, it is becoming increasingly clear that retailers must adapt to survive. The closure of stores such as Debenhams and Missguided highlights the need for retailers to be smart and progressive. In order to stay afloat, retailers must consider adopting a phygital approach. By combining physical and digital elements, retailers can create a unique shopping experience for customers, driving engagement, and increasing sales.

This approach allows retailers to offer the best of both worlds to their customers, providing convenience and choice through online channels, as well as the ability to try before you buy in-store. There’s no doubt that the industry is undergoing a transformation, and retailers must be willing to embrace new technologies and ideas in order to stay ahead of the game.

Those who do not evolve will struggle to survive.