Key takeaways:
In-store isn’t going away — but it’s shifting
Online shopping may be stronger than ever, but there’s no denying that consumers shop at brick-and-mortar stores with gusto. Physical stores still account for 76.2% of total US retail sales, underscoring their continued relevance in an increasingly digital economy. And of course, a large majority of shoppers want to see, touch and feel items before they buy them, and even seek expert advice on high-value purchases to make the most informed choices.
Even the most tech‑savvy demographic group ever, Gen Z, hasn’t cast away in‑store shopping in favor of eCommerce. Over two‑thirds (69%) of Gen Z consumers shopped in‑store at least weekly, underscoring that physical retail still plays a central role in their routines.
While social media and AI channels are increasingly influential at the top of the funnel — roughly 1 in 3 Gen Z consumers now prefer to use GenAI tools such as ChatGPT and similar platforms to research and discover potential purchases, and around 28% already start product searches in ChatGPT — physical stores remain their top choice for actually purchasing new brands or products.
The renaissance of in-store shopping, whether for trying on items or picking up products ordered online, provides fertile ground for “phygital” experiences.
Phygital is the blend of physical and digital experiences in retail, creating a seamless interaction between the two worlds. The idea behind phygital is to combine the best of both — physical touchpoints (like stores) with digital technologies (like online shopping platforms, AR and mobile apps) — to enhance the customer experience. In other words, phygital bridges the gap between in-store and online experiences, allowing consumers to interact with brands in a more dynamic and flexible way.
For example, you might go to a store to try on a product (physical), use a QR code to check online availability or product information (digital), and then make a purchase online for home delivery (phygital).
What are the differences between phygital, omnichannel and unified commerce?
With so many buzzwords in commerce today, how can you distinguish between closely related terms like phygital, omnichannel and unified commerce? While the lines between them can sometimes blur, it’s important to understand the key differences that set each approach apart. Here’s what you need to know:
Focus: The fusion of physical and digital environments, emphasizing the convergence of offline and online experiences.
Examples: Using AR in stores for virtual try-ons, QR codes linking to product details, in-store touchscreens or mobile apps that enhance in-store shopping experiences.
Focus: A strategy that offers customers multiple channels to shop (online, in-store, mobile, etc.), ensuring a cohesive brand experience across all platforms.
Difference from phygital: Omnichannel encompasses phygital strategies by emphasizing consistent experiences across multiple digital channels (online, mobile) and physical.
Example: A customer may shop online, in-store or via social media, and all channels are synchronized in terms of promotions, customer service and inventory.
Learn more about omnichannel commerce.
Focus: A step beyond omnichannel. Unified commerce fully integrates all platforms (POS systems, online stores, mobile apps, etc.) into a single central system. This creates a seamless experience for both retailers and consumers, providing real-time visibility into data across channels.
Difference from phygital: Unified commerce is more about backend integration and technology. It allows for a seamless experience at every touchpoint, whereas phygital focuses more on the customer-facing blend of physical and digital elements.
Example: A single, centralized platform manages inventory, customer interactions, and sales, ensuring consistency across all touchpoints, whether in-store or online.
Learn more about unified commerce.
Benefits of phygital retail for shoppers and businesses
Phygital retail offers a wealth of advantages for both shoppers and businesses by integrating the best of physical and digital commerce.
Enhanced shopping experience: Phygital retail allows customers to interact with products physically — touching, feeling and trying them on — while leveraging digital tools for convenience. Digital technology streamlines processes such as checkout, often enabling faster, line-free purchases and integrating features like mobile payment or self-checkout.
Personalized recommendations: Through data-driven insights, phygital retail enables tailored product recommendations based on individual customer preferences. Shoppers receive offers and suggestions that align with their tastes, enhancing their connection with the brand and creating a more engaging shopping experience.
Real-time product availability: Phygital retail provides up-to-date information on product availability, enabling customers to check stock levels online and in nearby stores. This reduces the frustration of visiting a store only to find items are out of stock, empowering customers to make informed purchase decisions and improving convenience.
Increased customer engagement and loyalty: By offering personalized, interactive and seamless shopping experiences, businesses can increase customer engagement. When customers feel valued and enjoy unique, phygital interactions, they’re more likely to return for future purchases and become loyal brand advocates, contributing to long-term customer retention and word-of-mouth promotion.
Data-driven insights: Businesses benefit from the wealth of customer data generated through phygital retail. Analyzing this data helps retailers gain insights into customer behavior, preferences and pain points. These insights allow businesses to make informed decisions regarding product offerings, marketing strategies and inventory management, ultimately boosting operational efficiency and profitability.
Competitive advantage: Embracing phygital retail gives businesses an edge by offering innovative shopping experiences that appeal to tech-savvy and experience-driven consumers. The ability to seamlessly blend the physical and digital sets businesses apart from traditional competitors, attracting a wider audience and fostering customer loyalty in an increasingly competitive market.
The technologies and trends boosting the future of phygital commerce
The future of phygital will likely see a rise in AI, AR/VR, mobile integration and smarter stores — and much more.
AR and VR are expected to play a significant role in enhancing phygital experiences. AR allows customers to “try before they buy” digitally while in-store, and VR could create immersive shopping experiences, enabling customers to explore virtual showrooms or stores.
By combining physical and digital data, retailers can offer hyper-personalized experiences. This could mean personal shoppers assisted by AI, custom product recommendations delivered in-store via digital touchpoints or even fully personalized store layouts.
Stores are likely to evolve with IoT (Internet of Things) devices, such as smart shelves, which can detect inventory levels and customer interactions in real time. Smart mirrors that allow virtual try-ons and cashier-less checkouts using biometric or mobile payments will also become more common.
Mobile devices will act as a key phygital touchpoint, linking the physical and digital shopping experience. Apps will enhance in-store experiences with personalized offers, location-based notifications, and seamless checkout options.
For instance, “store mode” in mobile apps enhances the in-store shopping experience by providing customers with tailored tools and information when they enter a physical store. When activated, the app may offer features such as real-time inventory checks, aisle navigation, personalized promotions, and faster checkout options, such as mobile payment or self-checkout. It can also notify customers about exclusive in-store deals or let them scan items for additional product details.
Implementing phygital commerce: Requirements
To successfully implement phygital retail, companies must carefully manage several key requirements, including:
Integrate physical and digital systems, ensuring that in-store touchpoints, such as kiosks and smart devices, are seamlessly connected with a unified commerce platform. This approach provides a centralized system that manages sales, inventory and customer data across all channels, allowing for a consistent experience. After all, it requires robust infrastructure to support technologies like AR/VR and IoT devices, which must function smoothly across both physical and digital environments, ensuring real-time synchronization and seamless customer journeys.
Real-time data synchronization is essential for accurately tracking inventory across channels, preventing issues such as out-of-stock items or incorrect delivery information that could frustrate customers.
Intuitive and non-intrusive tools ensure faster adoption. Not all shoppers are accustomed to using digital technologies in physical spaces, so the design and implementation should prioritize simplicity and value.
Adequate employee training is also crucial. Staff must be able to guide customers in using phygital tools and understand how these technologies enhance the shopping experience.
Investment in advanced technologies, such as AR displays or smart mirrors, is critical for phygital to take off. Due to the sizeable financial investment, consider the ROI associated with these technologies. A recommendation is to first try out such immersive experiences in a few stores, measuring customer uptake and conversion rate.
Implement strong cybersecurity measures to protect the data collected from both digital and physical interactions, safeguarding customer privacy and trust.
Real-world examples of phygital success
By unifying its in-store and online operations through a single platform, Australian electronics retailer Jaycar ensures a seamless shopping experience. Store associates can access real-time inventory, product details and customer loyalty data, enabling them to provide expert guidance, process online returns in-store and place orders for out-of-stock items — all while standing alongside the customer.
The leading pet food and supplies retailer in Canada, PetSmart, focuses on unifying its operations across multiple channels and in-store services to drive customer loyalty. The Treats Rewards program integrates data from all customer touchpoints to deliver personalized messages and tailored offers to over 67 million loyal customers.
At the forefront of creating captivating phygital shopping experiences is Ulta Beauty — whether customers are at home, on the move or in-store. Their innovative initiatives, such as the Virtual Beauty Advisor and GLAMLab, utilize cutting-edge AR and AI technologies. The Virtual Beauty Advisor offers personalized product recommendations, while GLAMLab enables customers to try on virtual makeup, using machine learning algorithms to detect facial features and apply a 3D makeup look that moves in sync with their expressions.
Embracing the phygital future with unified commerce
As customers demand seamless, personalized experiences across every touchpoint, retailers must move beyond incremental upgrades and rethink how their technology stack supports engagement. Delivering true phygital experiences requires more than layering digital features onto legacy systems; it demands a unified commerce foundation that connects inventory, customer data, orders and payments in real time.
Traditional POS solutions were built for store transactions, not for today’s boundaryless commerce. While many have added eCommerce integrations over time, they often operate as siloed systems, creating data delays, fragmented customer profiles and inconsistent inventory visibility. These limitations make it difficult to execute real-time personalization, enable flexible fulfillment or empower associates with a complete view of the customer.
Solutions like commercetools InStore are designed specifically to eliminate those gaps. Built on a unified commerce architecture, commercetools InStore connects all touchpoints with a single platform. This gives store associates live access to centralized inventory, customer profiles and order history, enabling endless aisle ordering, seamless returns across channels and personalized service at the point of interaction.
Instead of forcing phygital experiences to work around disconnected POS systems, retailers can extend their core commerce platform directly into the store environment. The result is a truly unified ecosystem where digital and physical touchpoints operate from a single source of truth.
Manuela leads content strategy at commercetools. With over 20 years of experience in B2B SaaS, she writes about all things commerce by day and turns to fiction by night. She loves long walks, traveling, and, unsurprisingly, reading books.
