Welcome to the Phygital Age | Eolas International

Welcome to the Phygital Age

There was a time when E-commerce experts stated the high street store was dead. That retail stores of any kind will bow down to the superiority of internet purchasing. Although there is no question E-commerce has impacted retail (1 in every £5 pounds spent with UK retailers is now online), there has been a recent resurgence in traditional retail markets due to its adaptability of engaging digital technology within the physical store and by retailers creating a new concept where they integrate online, offline, logistics and data across a single value chain – one unified world where traditional retail and e-commerce lines are blurred, where all avenues immerse under one universal umbrella whose sole purpose is to satisfy the consumer’s digital, social and physical experiences. The emergence of such a concept has taken on many names & forms over the years from “bricks n clicks” to “clicks & mortar” to its newest name the “Phygital” market.

Phygital marries both the online and offline environments by trying to take the best aspects from each space to create a much more complete and satisfying customer experience. This phenomenon distinguishes itself with its multi-channel focus where the consumer’s purchasing process is fluid and familiar. The user browses and buys, but they also feel; this is why, despite the fact we can get just about anything we desire using our smartphones, 22% of consumers still prefer to conclude their purchasing project in a brick-and-mortar store. The opposite also occurs: How many times do we go into a store to see, touch, or try on an item that we later order online? 

Consumers want to interact with brands wherever and whenever they want, not just in parts. Grocery retailers worldwide are embracing technology in an industry that is known for its razor-thin profit margins. UK grocery chain Tesco has invested heavily in things like mobile payments and couponing and virtual stores, and has effectively blended together its physical and online presence. 

32% of consumers say that location-based search ads have led them to visit a store or make a purchase, so it’s more important than ever for businesses to understand the impact that online presence has in driving visits to physical locations, whether that’s a store, hotel, car dealership or restaurant.

However a recent surveyby Kibo found that:

  • 37% of retailers do not know how to deliver a consistent digital-to-physical multi-channel experience
  • 58% do not have the ability to view customer information across various touchpoints
  • 64% said their technology wasn’t that effective at capturing in-store data on customer preferences.

In the US, Amazon is the e-commerce market leader and when they bought Whole Foods Market, the $13.4 billion deal shook the grocery world, setting off a frenzy of deals and partnerships that continues to intensify today. Traditional retailers pursued digital technology, and online companies reconsidered their relationship with brick-and-mortar retail. Recently, Walmart surpassed Amazon in a survey of online food shoppers, more of whom said they most recently visited Walmart’s site for groceries thanks to the rapid deployment of its curb side grocery pickup service, which is now in about 2,000 stores.  Walmart has stores within 10 miles of 90% of Americans and uses this to its advantage, allowing customers to shop online and pickup in-store. It has sped up its supply chain and added new shipping options leading to a new battle amongst these supermarket giants – the final mile.

The Final Mile

Food shopping is one of the last major obstacles for online retail. Groceries are unique in that their inventory is perishable, fragile and heavy. Grocery customers often shop at the last minute, like to see the food they are eating and don’t want to pay high delivery fees. But with E-commerce growth inevitable, the key challenge is the cost to deliver to consumers… the final mile… the single biggest challenge in online retail right now.

Trends suggest the Pick Up/Click-n-Collect services will dominate for years to come, just as it has been the case in UK and France. For consumers of FMCG product, physical locations matter, especially for grocery shopping, where immediacy and food inspection play a critical role for shoppers. But even for traditional retailers the reality is that Click & Collect is much more cost-effective than ship-to-home or home delivery.

Kellogg’s global e-commerce director, Richard Gibbons believes that the convenience sector is ripe for digital disruption. He states that true convenience for a shopper is not the version we see now in the market, which is like Amazon Prime, with a £40 minimum basket, delivered in one to two hours. According to Gibbons, that’s not e-commerce convenience. “E-commerce convenience is small baskets within 30 minutes, paying a £1 or £2 delivery fee,” he said, speaking at the Millennial 20/20 conference. He cites the example of a US business called GoPuff, which aims to replace convenience stores by offering to deliver hundreds of products including ice cream for just $1.95 per delivery (or free if shoppers spend $50).

What Next?

Virtual reality has the ability to let customers “try” products before they buy them online. They can also try on clothing using a body scan and see the clothing on an avatar. Technology also will transform brick-and-mortar locations. Robotic shopping carts will greet customers and be self-driving, calculating purchases as customers move around the store. Other technology includes smart mirrors that help customers in a hurry envision clothing on their bodies.  Radio-frequency identification tags will help retailers better manage inventory. We are slowly beginning to see these concepts embed themselves in our culture. Amazon’s moneyless stores where they have removed the checkout process completely or Peapods virtual stores, where you scan an item off a “billboard supermarket” and the items auto deliver to your door. Similar in format to dash buttons, although now discontinued by Amazon, these buttons allowed the customer to quickly reorder popular household items with just the press of a button.

Some might think it’s a big jump from the above concepts listed to “automated purchasing processes” – where technology recognises the requirement for and makes the purchase, for you. But is that the case? Or is this the next step in the retailing phygital age? With the emergence of voice recognition software and AI isn’t it only a matter of time before FMCG retail is taken out of the consumer’s hands completely, for regularly purchased items?

A recent piece of research in the UK by Salmon, the digital e-commerce experts, into what they term programmatic commerce, has found that 57% of consumers will be ready for automated purchasing within the next two years, and they will be most keen to purchase FMCG goods.

At Eolas we pride ourselves on being at the cusp of FMCG trends, operating on the front line across the various shopping channels, identifying the consumer’s needs and any potential pitfalls that may be present. That’s why we recently developed our consumer based app to receive data feeds directly from the consumer, in the moments that matter. With access to over one million consumers globally, we track consumer product experience in the marketplace, in-store, online, on the go and in home. The idea simple, no matter the technology, the channel, the trade, we want to get to the heart of what the consumer, your consumer, experiences.