From Pop-ups to Luxury Brands: How Phygital Retail is Reshaping the Industry

Anna Nolan

May 4, 2023

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.

While online shopping has become increasingly popular, many consumers still prefer to purchase products in-store. A survey by the International Council of Shopping Centres found that 69% of consumers prefer to purchase products in-store and the remaining 31% prefer to purchase online. However, these consumers also want an interactive experience, with 61% of them saying they would visit a physical store more often if it offered an interactive experience, as reported by Mood Media.

Phygital retail takes this concept one step further, using technology to create an omnichannel experience in a physical location for customers. Brands like Nike, Adidas, and Zara use augmented reality, AI-driven personalisation, and mobile commerce to create a seamless shopping experience, including trying on clothes virtually, receiving personalised recommendations, and purchasing products all via mobile apps. Nike’s flagship store in New York is one of the best examples of this, championing all things digital with ‘Scan to Try’ features allowing consumers to scan an item that will then get brought to a room for a fitting. By scanning a code on an in-store mannequin, buyers can shop the entire look instantaneously and have items brought directly to a fitting room for the final try-out. Nike’s ‘Instant Checkout’ also allows for payment from within the Nike App, eliminating the need for consumers to endlessly queue up.

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.

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 these uncertain times, and in order to stay afloat, retailers must consider adopting a phygital retail 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 in the fast-paced and competitive world it is.