In recent years, the concept of a “phygital” business model has emerged as a new approach to bridging the gap between physical and digital fashion. The term “phygital” refers to a business model that seamlessly integrates both physical and digital components to create a unique customer experience. Let us explore the key features and benefits of phygital business models and discuss how they are shaping the future of fashion.
The Rise of Phygital Business Models
As fashion brands have sought immersive technologies to woo customers, they have combined the strengths of physical and digital products. Traditional, old-economy businesses often struggle to compete with e-commerce and digital business models, and the ubiquity and accessibility of online inventory. At the same time, many online retailers have found that they cannot replicate the in-person experience that physical stores offer.
Phygital business models seek to address these challenges by combining the best of both worlds. By using technology to enhance the in-store experience and integrating digital channels with physical locations, retailers can create a seamless and engaging customer journey. Phygital business models enable personalized, immersive, and interactive shopping experiences for consumers and improve customer lifetime value for brands.
Unique Signatures of Phygital Business Models
The phygital business models have unique signatures distinguishing them from traditional physical and digital business models.
• Seamless Integration and Experience
Phygital business models seamlessly integrate attributes of physical products with digital experiences to create cohesive customer engagement. For example, a customer could use a fashion brand’s mobile app to browse and virtually try clothes using AR, then buy an NFT of the digital dress to be redeemed for a physical garment. The brand could use the data from the NFT to design an optimally personalized in-store experience during the visit, including recommending products previously browsed.
• Interactive and Immersive Technology
Phygital business models often incorporate interactive technology such as augmented reality, virtual reality, or touchscreen displays. They can provide customers with a more immersive and engaging experience. For example, a fashion brand might use augmented reality to enable customers to see how a certain accessory or uniquely styled garment would look on them before the purchasing decision.
• Hyper-Personalization
Phygital business models leverage data to provide a personalized experience for each customer. By analyzing data from multiple channels, retailers can gain insights into customer preferences and behavior, letting them tailor their offerings and marketing messages to each individual.
• Omnichannel Retailing
Phygital business models embrace an omnichannel approach to fashion; customers can interact with a brand through multiple channels and technologies seamlessly. This approach lets fashion brands meet customers where they are and provide a consistent experience across channels.
Benefits of Phygital Business Models
Phygital business models offer several benefits for brands and consumers.
• Improved Customer Experience
Phygital business models provide a more engaging and personalized customer experience. They combine the strengths of physical and digital products; fashion brands can create a seamless journey enabling the needs of today’s consumers through interaction, ownership, voting rights, etc.
• Increased Customer Loyalty
By providing a personalized and engaging experience, fashion brands can increase customer loyalty and retention. When customers feel valued and understood, they are more likely to return to a brand.
• Greater Operational Efficiency
Phygital business models can also improve operational efficiency by leveraging technology to streamline processes. For example, brands can use artificial intelligence on data to optimize inventory management, reduce waste, and improve supply chain logistics.
• Enhanced Data Collection And Analysis
Phygital business models provide brands with more data and venues of analysis than ever before. By collecting data from multiple channels, fashion brands can gain insights into customer behaviors, interactions, and preferences, letting them optimize their messaging, positioning, offering, and targeting.
Examples Of Phygital Business Models
Brands have successfully started phygital business models today. Some examples include:
• Nike
Nike’s phygital business model leverages its mobile app to enhance the in-store experience. Customers can use the Nike app to reserve products, check inventory, and get personalized recommendations. When they visit a Nike store, they can use the app to scan product barcodes and receive more information about the product, including customer reviews and styling suggestions.
• Sephora
Sephora, another prominent brand, has successfully activated its phygital business model. They use technologies such as augmented reality and facial recognition to provide a personalized and engaging in-store experience. Customers can use Sephora’s Virtual Artist feature to try on different makeup looks using augmented reality, or they can receive personalized skincare recommendations using the brand’s Skincare IQ technology.
The Future of Phygital Business Models
As artificial intelligence, Web3 and metaverse converge, consumers will likely continue to demand hyper-personalized clothes tied to their avatar and identity spawning demand for phygital business models. Phygital business models also offer unique and compelling approaches for fashion brands, combining physical clothes or accessories with digital ownership and experience.
By creating a seamless and engaging customer journey, retailers can increase customer loyalty, improve operational efficiency, and gain valuable insights into customer behavior and preferences.
Concluding Thoughts
Phygital business models bridge the gap between physical and digital products adding experiences to the consumption. The fashion industry seems to be the predominant early adopter applying these business models to the modern-day consumer. Phygital business models deliver several benefits, including improved customer loyalty, carbon footprint reduction, operational efficiency, and higher quality data collection and analysis, etc. As this decade unfolds, we will likely see the tighter coupling of experience-enhancing technologies like artificial intelligence, augmented reality, virtual reality, blockchain, the semantic web, etc. Brands should adopt phygital business models to stay relevant and meet the evolving needs of their customers.