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RICE 2022: How Nike, H&M and Razer are Putting ‘Phygital’ Retail Into Practice

RICE 2022: How Nike, H&M and Razer are Putting ‘Phygital’ Retail Into Practice
Tom Philipson discusses Razer's approach to future-forward retail.

The value of blending digital innovation with environmental design to create next-generation retail experiences is the message Tom Philipson, Founder and CEO of strategy and design firm YourStudio, shared during the design:retail Conference and Expo session titled Radical Retail: Connected Future at the Retail Innovation Conference and Expo.

“What has changed over the last couple of years is the idea around phygital identities,” said Philipson. “Brands are starting to think about what that actually means for them. [There is] this idea of far-reaching desires for exploration and discovery, and for me that is the exciting part of retail. This more radical future-forward retail is how we’re creating exploration, how we’re creating discovery, for not only physical environments but also the digital environments and consumers’ digital identities as well.”

As consumers return to brick-and-mortar retail, they are demanding greater engagement, a byproduct of their time spent shopping through ecommerce, social platforms and virtual buying appointments during COVID-19 stay-at-home orders. The bottom line is that while consumers want to return to brick-and-mortar, they now need incentives to spend their precious time with brands in physical spaces.

“It’s no longer enough to offer functional stores and formulaic consumer service,” explained Philipson. “Post-pandemic shoppers are seeking more, from emotionally led environments to community building.”

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Notable forward-looking retail initiatives have recently been introduced by brands including lululemon, H&M, Nike and gamer lifestyle brand Razer, according to Philipson.

Why Engaging Customers is More Important Than Ever

Philipson identified four key components of the new benefits consumers want from retailers:

  • Establish a human connection;
  • Align with personal values;
  • Gain trust to build a long-lasting relationship; and
  • Add value to shopping at a physical location in real life.

The new retail ecosystem relies on an engaged customer, said Philipson, with the customer journey broken down into engagement opportunities within the physical and experiential environments. This model also relies on content delivered within applications, online or through the metaverse. Together, these elements blend to create a retail ecosystem that flows infinitely beyond the product and remains centered on the customer rather than ending after a purchase.

“How are we creating retail ecosystems for keeping consumers engaged, keeping consumers connecting with our brand and product, and with the stories we’re trying to tell?” asked Philipson. “With our values. It doesn’t end anymore. It’s not a pre-, during- and post- anymore. We are much more connected now, especially since COVID.”

Citing McKinsey data that showed 75% of shoppers have different habits than before the pandemic began, Philipson said the new retail formula should include service beyond products, reimagined journeys, cross-reality adventures and meaningful metrics.

Retailers that are succeeding in this new environment are creating opportunities for customers to be entertained and educated regarding product and brand values. These retailers also are ensuring their brick-and-mortar locations provide an enjoyable experience for their customers, in part by working synergistically with digital tools.

“Use the store backdrop to stream live and educate consumers on product, educate consumers on the values of the brand, and entertain them,” said Philipson. “Retail should be fun, it should be a really enjoyable experience. That is when we talk about product play. It’s how you put the hero in the product.”

Reimaging the Customer Journey Through Service

When brands venture beyond selling product into a place where they outline their values to attract like-minded consumers, they lay the groundwork for community building, which provides them with new ways to meet more of their customers.

Citing lululemon’s digital approach, Philipson shared how the activewear brand includes guidance on its site for customers to improve their yoga practices and other workouts in ways that are organic online but also align with the store environment.

At the H&M flagship in Amsterdam, the retailer has created fresh service-based experiences designed to tap into shoppers’ emotional responses, thereby encouraging them to return to the location.

“They’ve got a postal service where you can send clothes back or get things delivered, with changing rooms right beside it,” said Philipson. “They’ve also got repairs so you can change, repair and adjust clothing if it doesn’t quite fit. They don’t just do H&M clothes; they’ll repair other clothes for free just to show they’re really leaning into their values of longevity and trying to get the most out of a product.”

Embarking Upon the Cross-Journey Adventure

Approaching new methods in retail requires brands to be bold and brave enough to apply new concepts. Consumers are seeking impressive experiences when they engage with brands, so retailers must come to the table with fresh approaches that provide a fluid transition between physical and digital spaces.

“[The metaverse] is a new tool and everybody is obsessing over what this means,” said Philipson. “How are we creating online-to-offline experiences? What does that mean for our in-store experiences? How are we creating these in-store adventures that cross over? These consumers are looking for these adventures. They are looking for these really interesting ways to stay connected with a brand.”

When creating a London-based destination with Razer, Philipson noticed the impact that a physical store had on consumers who were accustomed to virtual experiences. By providing these loyal gamers with a “clubhouse,” complete with knowledgeable associates and a full gaming arena, the brand increased its engagement with its fans and created advocacy for its in-person presence — reviews posted online averaged approximately 4.8 on Google. By creating a space for its existing community, Razer rewarded its brand loyalists but also reaped the benefits of good publicity that stemmed from accurately identifying the experiences customers would love.

“They become your best press people to share how amazing it is,” said Phillipson. “We had 2,000 people queued to get in there on the first day. It was bonkers. It was like a little carnival. People took trains from all over the country to be there. It was this space that was for them and they wanted to meet their community in real life. The digital communities that are out there building the space that is right for them will get payback if they get it right.”

At the Nike House of Innovation in Paris, the brand offered testing not only for products but also for their performance in different weather conditions with a weather simulator that allowed customers to interact with the product in different climates. Nike took the experience a step further by allowing customers to create customized videos of the experience within the different conditions, generating content that is sharable across all channels.

“Nike pushes the envelope with really interesting things that they play with in-store and this is a great example of consumer engagement with product and real product storytelling that feels uniquely them,” said Philipson. “It can transport the consumers with the product that aligns with the backdrop. There is also this tech that looks at the different weather that is surrounding the area and breaks that down, creating some really interesting data visually in-store to connect with that local consumer.”

New Measurements of Success

While making these types of bold moves might be scary for some brands, one area that can be frightening to all is identifying the metrics by which to measure the success of these types of investments. However, Philipson noted that the traditional physical retail KPIs — sales, sales per square foot, footfall and average basket value — remain crucial to measuring success in that space.

Philipson’s meaningful metrics build on these traditional KPIs to examine new areas that retailers should also consider when measuring ROI, including:

  • Engagement analytics gleaned by providing consumer experiences that yield customer data;
  • Experience advocacy that sees customers sharing their excitement about their engagement and discussing their positive brand interactions within their communities; and
  • Halo effects that drive online sales from physical stores following customer interaction with product at a brick-and-mortar location.

“There is a really new way of thinking about retail and it’s all around engagement,” said Philipson. “It’s all around product storytelling. It’s all around building that trust with the consumer, not about sales. That’s been really interesting because it’s completely rethinking how you do retail.”

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