Closed shops, deserted city centres and booming e-commerce – the pandemic has put the changes in retail under a magnifying glass. Trends that had been going on for years gained colossal momentum through lockdowns and distancing restrictions. But whereas companies have long since been building their digital channels primarily out of curiosity, the past 18 months have turned these experiments into solid strategies for their own economic survival. Online retail has proven its own future viability and its potential to change retailing forever. In Germany, the e-commerce sector recently grew 6.6 times faster than offline retail, in the Netherlands as much as 12.2 times, and in Italy 16.2 times faster, as shown by figures from Nielsen IQ.
With increasing vaccination rates and opening-up strategies, European economies are starting to recover. This year alone, the economy in Europe and the EU is expected to grow by 4.8%. Services play a decisive role in this. Private consumption is picking up. For the retail sector, however, this means having to deal with the new expectations of customers. A transformation of the shopping experience is necessary because the importance of digital is not diminishing with the end of the pandemic – quite the opposite.
Customers have got to know the options that online retailing offers them, for example when it provides product suggestions that perfectly match their own wishes and needs. They have already seen how products and services can easily be booked via Messenger, and how simple it is to select extras online and have product features customised. In the age of smartphones, apps and digital assistants, consumers expect all sales channels to be integrated and to complement each other in order to offer them consistent cross-channel shopping experiences. This also applies where the online and offline worlds meet in brick-and-mortar retail. Omnichannel strategies are very good, but phygital strategies are better because they combine a seamless shopping experience with hyper-personalisation of the offering to the customer.
Phygital is a portmanteau word consisting of physical and digital blended together. The approach is the next evolutionary stage in addressing customers and helps meet their new expectations and increase the attractiveness of over-the-counter retail. It combines the advantages of online and offline and removes the boundary between the physical and digital dimensions of retail. Digital applications interact with the physical world, thus creating new customer experiences. Which products did customers in brick-and-mortar shops last look for online? What prices are they willing to pay and what individual pricing structures could brick-and-mortar shops offer them? What products and goods must shops offer? These questions outline only a few of the multifaced approaches: phygital can also mean, for example, that companies introduce payment processes via apps and thereby combine digital and physical experiences.
The necessary basis for phygital experiences is a comprehensive data strategy. In this context, companies break down their data silos, make information available company-wide, consolidate, orchestrate and finally activate it within their own organisations in order to implement specific solutions. The customer data platform, the platform that combines all data and makes it available for various channels, plays a key role here. This data, made available across all channels, enables the sales staff on site to address their customers in a more targeted and individual manner. Employees in the branches will then already have to hand all the data on personal preferences as well as the purchase history from online retail and can therefore advise their customers in a more qualified manner than ever before.
GROHE provides a successful example of phygital experiences with the new digital experience hub GROHE X. The experience hub, developed in conjunction with the agencies IBM iX and VOK DAMS, makes the brand individual and tangible on a new level. Based on the AI and cloud technologies from IBM, the hub serves a wide variety of applications: it offers visitors digital storytelling including a 360-degree view of the showrooms. At the same time, the hub serves as an event platform for both live and on-demand content and panel discussions. With the help of the hub, training courses for sales employees can also be carried out and 1-2-1 sessions can be held for partners, customers and employees. Paramount to addressing users of the hub individually is their assignment to clearly defined target groups on registration. GROHE as a brand makes it possible to choose the appropriate communication, regardless of whether customers are specialist dealers, installation technicians, architecture firms, press representatives or end users. Information from the website merges with data from offline user support. Purchase information from over-the-counter retailing can be used for digital products, while in the brick-and-mortar sector offers can be made based on information from online interaction. Linking the data creates a holistic approach and sustainable digital platform that impresses with personalised content and thereby offers added value specific to the target group.
Generating an authentic phygital experience requires technology that facilitates the immediacy of the shopping experience and immersion in a new type of digital customer experience, whilst the company can also physically interact with the customer at the same time. The basic requirement for this is integrated data management which covers all areas of online and offline business equally. This makes it possible to combine physical and digital elements in your own customer experience strategy. By combining the digital with the physical world, phygital creates unique, interactive end-to-end experiences, inspires digitally savvy customers beyond the online world and creates a clear unique selling point for companies in what is probably the most challenging competitive environment of all time.
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