The words ‘phygital’ and ‘omnichannel’ are often heard of in the same context. However, understanding the difference between the two is important for better implementation of phygital initiatives. This particularly concerns retailers who are contemplating phygital transformation of their business. They must also see why going phygital is becoming almost a necessity for a varied set of reasons. Once they grab the essence of phygital and see how it can help steer their business to new heights, they can be better prepared for planning and implementing phygital transformation of their businesses.

What is Phygital?

The use of the word ‘phygital’ has seen ups and downs in the last few years but it is one with gaining popularity. We need new words even to describe old or simple concepts. The word ‘phygital’ is a typical example of this. It simply means the integration of online and offline capabilities which is not a concept alien to us. It refers to the synchronised use of online and offline capabilities to achieve certain premeditated objectives. Let us not jump to retail and eCommerce now and delve a bit more into the concept of phygital in its generic form.

Suppose that you are a professional in the field of digital marketing. Your space of work is mostly online and now you want to reach out to the offline market. You can achieve this objective by going phygital. First, you will have to create offline touchpoints. For example, you should have a visiting card with your contact details. You should also consider physically attending seminars and conferences concerning your profession. These are the places where you build your offline professional networking. By sharing your visiting card with other industry professionals, you give them an avenue to come to your online space of work. Your visiting card is the phygital juncture where you link your online and offline networks. Your visiting card here is only one of the examples of how you can go phygital. There could be more ways in which you can deploy phygital tools and strategies to integrate your online and offline space of work.

What is Phygital in Retail?

Once the concept of ‘phygital’ is clear, comprehending its application is not difficult. In retail also, phygital means the same thing i.e. it is the integration of online and offline capabilities to achieve certain predetermined objectives. One of the primary reasons why phygital is applied in retail is to go omnichannel. Omnichannel is the way of operating a business in which online and offline systems work simultaneously and in an integrated manner. The key objective behind going omnichannel is to provide a seamless shopping experience to customers with the advantages of both online and offline shopping features. The use of phygital technologies and strategies makes omnichannel feasible.

Imagine a brick-and-mortar departmental store that wants to adopt phygital transformation. But before that the objectives of doing so must be established. As discussed above, omnichannel is one of the most popular reasons behind retail businesses for phygital transportation. Based on specific omnichannel features the store wants to offer, it will have to build its online capabilities. For example, if the store wants to start an online sales channel, online capabilities in this case would include an eCommerce platform, shopping website/app, order management software and applications, other BPM software, etc. All these technologies with relevant strategies and operations planning would make omnichannel possible which on the broader picture is a depiction of going phygital.

Why going phygital has become important in retail?

Four important reasons for retailers to go phygital are discussed below.

Customer Experience

Delivering a superior customer experience has become very important for today’s retail businesses. There are many ways to elevate customer experience. Some of the effective ones are pointed out here:

  1. Making finding products easier on digital platforms (e.g. search engines, product listing) and/or in stores (via planogram, navigation guides, layout planning)
  2. Trained and professional staff across online and offline touchpoints (e.g. sales, delivery)
  3. Extensive merchandise, stock availability
  4. Use of modern technologies like AR, VR, and digital displays for product trials and descriptions
  5. Quicker checkout options
  6. Multiple payment options (e.g. cash, cards, UPI, EMI)
  7. Prompt and reliable delivery/pickup service
  8. Collection of customer feedback and efforts to implement them as per relevance

Most of the points highlighted above are possible by the use of technology directly or indirectly. For example, consistently maintaining adequate stock levels (physical) is made easier by the use of inventory management software (digital). Waiting times for checkout (physical) can be reduced with the use of automated scanning technologies (digital). By going phygital, the right tools and technologies come into the place and improve the quality of customer experience.

Impact on Sales

Going phygital tends to carry a positive impact on sales. This works out in multiple ways. Two of them are discussed here. Firstly, by offering online and offline sales channels, retailers open their business to two worlds. This omnichannel presence creates the opportunity to attract both online and offline customers. Secondly, customer experience has a big role to play in triggering repeat buying behaviour. As a customer, think of your favourite grocery or departmental store. Surely, there are value propositions at play here. Are any of these value propositions physically delivered and based on technology? If the answer is yes, then the delivery of that value has been made possible because the store has adopted phygital. For example, if home delivery (physical) is that value to you, then the technologies in action behind it (digital) are what made this integration possible. Of course, if you look from the perspective of the store, there are more such phygital elements involved in executing the order fulfilment process. Such successful retentions secure consistency in repeated buying which in turn converts into potential sales.


Phygital requires the establishment or realignment of both online (digital) and offline capabilities. It does not work with anyone. So, when online capabilities are created, it also gives rise to the generation of internal business data by the use of various software applications for different business requirements. This data (from both online and physical processes) gets accumulated and is then available for research and analytics. Reconsider the example of the digital marketing professional discussed earlier when we were explaining the concept of phygital in general. By creating an offline presence and integrating it with online systems, this professional will have access to data to better analyse the offline market. This data can help him/her formulate better acquisition strategies and more robust internal processes.


If your direct competitors are doing it, you too should consider doing it. There can be no more refined way of telling this. Every retail startup coming up today is phygital. As a customer, think of your favourite departmental store again. Will you continue buying from that store if a new store comes up with a better shopping platform, higher payment flexibility, quicker delivery, or any other value that matters to you? Not all values need to be technology-based or have any direct physical implications for customers. However, most of the value propositions and value additions nowadays are based on technology and carry physical implications for customers. When you are talking about phygital, you are no longer referring to bare values but experiences which may later become value propositions. For example, the next big thing, which has already arrived, is IoT-based purchasing.

Achieving Phygital Transformation in Retail (Brick-and-mortar)

Establishing the Reasons for going Phygital

In adopting any improvement initiative, the first and foremost requirement is to have a clear understanding of why it is being taken. If you want to buy a new phone, you must have good reasons behind it. If you want to franchise your business, you must have good reasons behind it. It is a universal necessity. The same applies when a retailer considers the option of making their business phygital. Different retailers have different reasons for this but here are some popular ones:

  1. Improving customer experience
  2. Counter competition
  3. Data-aided decision-making
  4. Enhanced operational efficiency
  5. Cater to both online and offline market segments
  6. Increasing sales
  7. Modernisation

Knowing why you are going phygital will help you plan the rest of the process.

Analysis of new Business Requirements

Since phygital retail transformations are done with some objectives, the same must reflect in business planning and operations. For example, if you want to attract customers from social media, you must make many changes/additions to your business. This will primarily work in the areas of social media management, IT capabilities, order fulfilment, warehousing, logistics and delivery, team management, and communication channels. Only when you will create these and other necessary capabilities, your online and offline channels will be integrated and function as intended to achieve your phygital transformation goal of catering to customers from social media platforms. Your business may already hold some of these capabilities. However, given your phygital goals, you will have to make changes/additions as required.

Phygital transformation also has repercussions on business models and business planning. Using the above example, if you are adding social shopping as a channel to your retail business, it will also affect your business model. For example, now you have an additional channel for revenue generation. Building this channel will come at a cost. New key partners may come into the picture. The value chain and its activities might call for redirections. Now you will be also catering to a new customer segment that will demand a separate CRM strategy. Making all these changes will also necessitate a revisit to your financial and commercial plans and estimates.

Analysis of Retail Phygital IT Requirements

Although the need for creating IT capabilities is almost certain in retail phygital transformations planning for the same needs special emphasis. Here, we are strictly talking about technology i.e. mainly software platforms. The software platform plays a crucial role as this is the juncture via which the online and offline systems integrate. If this bridge is broken or not ideal, the phygital objectives cannot be achieved. For example, if you want to add a feature where customers can provide feedback on the delivery and overall experience, the software must not only support it but also support it in the ways you want. Here, you are converting the physical experience of customers to digital scores. You may have multiple objectives behind adding such a feature. It could be to improve customer experience, enhance brand engagement, bring process improvisations, and more.

Development of Retail Phygital SOPs

In striving to implement phygital transformation and being successful at it, the operations planning has to be of high quality. If that is not the case, the chances of missing the phygital objectives will always remain high. Also, the old ways of working will not yield the intended results in light of the new business and operational requirements. Another factor is that phygital objectives are generally broad in nature. This is where retail SOPs for phygital operations come into the picture. Let us steer through this with an example.

Suppose that improving customer experience is one of your objectives here. It is a broad goal or objective that must be broken down into many smaller objectives to make it achievable. Say, you want that your customers should be able to order over WhatsApp or any other relevant communication platform. Then that platform becomes a part of your order fulfilment process. Somebody (or any automation solution) must be there to read and process the orders from the phone and bring them into physical existence. If the business processes are not planned that way, it will defeat the purpose of going phygital. SOP is a powerful concept that helps define business processes in high detail facilitating complex operations planning as in the case with phygital.

SOP-IT Integration

SOPs and IT must go hand in hand. Let us start with an example. Suppose that you want to cook a recipe using any traditional cooking medium. If you change the cooking medium and bring in, say a microwave, it will also affect your cooking procedure. Similarly, in business processes, technology affects workflow definitions or SOPs. SOP-IT integration ensures that business processes and business process software work like a team. This integration assumes critical significance in phygital retail operations.

SOP-IT integration paves the way for the perfect harmony of action between human efforts and software solutions. For example, customer feedback option/communication must be activated only after the delivery is completed and within a reasonable time. This will require your delivery team to confirm the delivery status. The rest of the process gets taken care of by the software.  You may further want feedback reports of the day emailed to you.

SOP-IT integration also plays a vital role in facilitating coordination between different business processes. The online-offline connections must never go down when different business operations flow through different processes or departments. For example, when a customer cancels an order, it triggers the cancellation process touching many processes or teams. It will ideally rope in order management, inventory, packaging, delivery, and cash/accounts. The flow of information to all the process stakeholders has to be swift and precise. Without software aligned with business and process requirements, achieving such levels of speed and precision is not possible, especially against volume.

Considering the use of in-store Digital Applications

In-store digital innovations are one of the most direct manifestations in retail phygital. Although these solutions are not yet commonplace they are attaining slow but certain prominence in the world of retail. Many big names in global retail cutting across industries are embracing in-store digital technologies that coincide with going phygital. A few examples of such in-store digital applications are:

  1. Use of smartphones for exploring, trials, and self-checkout
  2. Interactive kiosks
  3. AR and VR-based utilities
  4. Smart fitting
  5. Contactless payment
  6. Beacon technologies
  7. Smart shelves
  8. Auto Replenishment Systems (ARS) for inventory management

The digital applications mentioned above or any other such solution can also be simply seen as digital. However, these applications are helping retailers improve customer experience and business processes. These applications have positive physical implications. For example, automated checkout solutions are eliminating the need for customers to wait in checkout queues. ARS helps businesses in making timely reorders or making any changes in it. These physical advantages derived from digital tools exhibit the essence of phygital.

Incorporating the Retail Phygital Capabilities

The first requirement here is to plan for and prepare an implementation roadmap. A solid approach to start with is forming a core team comprising departmental heads and senior managers for the entire implementation exercise. This core team should be assigned the responsibility for planning, supervising and implementing the phygital transformation process across the organisation. The KRAs of this team for the phygital transformation process shall include:

  1. Search, selection, and onboarding of key partners (e.g. software vendors)
  2. Purchase, customisation, and installation of software and hardware systems/technologies
  3. Ensuring the implementation of all other business requirements analysed in the planning phase
  4. Communication of new policies, rules, and regulations to all concerned stakeholders
  5. SOP training for employees
  6. Carrying out digital marketing campaigns
  7. Initiate control measures for necessary adjustments and fine-tuning in the new business systems
  8. Any other activity that is necessary for the successful execution of the phygital transformation process

Phygital refers to the synchronised use of online and offline capabilities to achieve certain premeditated objectives. Phygitalisation in retail means the same thing but the difference lies in the objectives of going phygital. One of the broader reasons for phygital transformation in retail is to go omnichannel. More specific objectives can include improved CX, enhanced market coverage, increased sales, use of analytics, and countering competition. However, the bigger challenge is implementing phygital retail transformation. Without proper planning and an execution roadmap, the intended objectives may not be achieved and instead, may cause damage to brands. A good approach is to see phygital transformation as a perpetual journey.


What is Phygital in Retail?

Phygital in retail means the integration of online and offline capabilities to achieve certain premeditated objectives. Phygitalisation in retail has become important for many reasons that include and not restricted to improving customer experience, having more robust business processes, data-driven decision-making and countering competition from other omnichannel businesses.

How Phygital is Changing Retail Customer Experience?

One of the most compelling reasons to adopt phygital in retail and eCommerce is to deliver superior omnichannel customer experience solutions. Some of the powerful ways in which phygital is redefining customer experience cutting across online and offline channels are:

  •         Making finding stores and products easier for customers
  •         Customers can buy from both online and offline channels
  •         Customers can change channels in their shopping journey
  •         More immersive and engaging display of products and services
  •         Customers can try certain products virtually before buying
  •         Customers can change orders, delivery details or payment modes before final delivery

How to Approach Phygital Transformation in Retail?

A sound approach to approach phygital transformation in retail is to carry it out in a planned and phased manner.  Most businesses take 6 months to 1 year for the complete transformation and that too is never concluding. This planning and implementation varies from case to case but here are some universal considerations to approach phygital transformation in retail:

  •         Establishing the reasons for going phygital
  •         Analysis of new business requirements
  •         Analysis of retail phygital IT requirements
  •         Development of retail phygital SOPs
  •         SOP-IT integration
  •         Considering the use of in-store digital applications
  •         Incorporating the retail phygital capabilities

For enquiries on retail phygital solutions or to speak to one of our expert omnichannel consultants, please drop us a message and we will reach out to you.