Let’s Get Phygital: Embracing the Commerce Revolution

By Victor Lee, President, Advantage Unified Commerce, Chicago; and Suzanne Skop, Head of Agency Partnerships at Instacart,

Not long ago, physical circumstances — location, transportation, time, budget — dictated how we shopped. Now, the lines between commerce, social, streaming, and gaming platforms have blurred. Often our digital identities are fueling how and where we shop. Nowadays, discovery, purchasing, and a sense of ownership are tied up with the digitization of shopping. The result is a source of frustration for brands and retailers because there is no longer one path to purchase. Instead, consumers now have many touchpoints as they shop online and in-store.

We are witnessing a revolution in commerce. Increasingly, shopping occurs within digital spaces that fluidly interact with the physical world. This leads to a simple truth: The future of commerce is ‘phygital’ – a phrase rooted in the new normal of real-time interchange between digital and physical commerce environments.

If you think about the context of Omni Commerce, it’s broadly defined as being everywhere consumers are, whether it’s in-store or online. The challenge we have today is a consumer environment that is trying extremely hard to find efficiency in everything it does – basically a one-click or one-swipe solution to everything. Contrary to that, there’s a retail environment that was built on locations. Even today, we still talk about the number of stores or doors or shelf space.

But look into how most brands or retailers are structured, and you see there’s still a lead for retail and a lead for e-com. Because both were started at very different times, they’ve grown to co-exist with each other rather than collaborating.

Where I think we’ve lost sight of is the consumer. Remember the old saying about focusing on the consumer? It worked well for years when brands were trying to define their message or brand even at retail when determining trends in fashion, food, or technology. But where it has stumbled a bit is at the commerce level. To understand why, just look at the marketing industry as a whole, pre-80’s, we had a handful of TV networks, outdoor, print, and radio were still dominant.

Then as cable emerged it opened up more audiences, but most brands never increased their budgets, they just carved out a smaller slice of the pie. Then the internet, email, banner ads, search, digital ads, podcasts, Connected TV, and all the way to RMNs today. But none of the other options went away and none of the budgets have increased. It became about spreading the ad budget a little thinner and hoping for the best.

Instacart is one company that’s been quick to recognize this new phygital world retailers are grappling with in 2023. Its tech is all about unifying the experience online and in-store. An AI-powered smart cart streamlines checkout to the point where you just take an item from the shelf, and it scans it when you put it in the checkout cart. It even has a scale. You can create your shopping list on the app, which then shows you how to navigate the store. Retailers can, for example, create personalized experiences throughout the store. Imagine a scenario wherein you place graham crackers in your shopping cart and then, preemptively, the app recommends chocolate bars and graham crackers to complete your s’mores dessert. And not only that, but it then shows you where they’re located in the store, too. It’s all about harnessing the benefits of both the in-store experience and the digital one to create wholly unique and personalized shopping experiences.

The truly remarkable aspect of all of this is it doesn’t require increasing marketing budgets, but rather shifting the focus to more consumer behavior analysis and less cool hunting. It may be unpopular to say, but we’d argue losing 10 percent of your conversion traffic due to bad SEO strategy or lack of digital shelf optimization outweighs the 2M views from that new macro influencer. The goalposts have moved, and brands need to change the game plan slightly because running the same play but throwing the ball further is not going to work in the long run.

Retailers have struggled with the infrastructure and operational challenges of a digital world. The solution is for retailers to think at the total commerce level, not just at the e-commerce level. The unknowns become knowable when you know the right questions to ask.

Key Takeaways:

  • Remember every brand is asking themselves the same question: ‘Where do I spend my next dollar?’ Now that every retailer has become a media ecosystem with their own tech, algorithms, and different investment asks for manufacturers, the question of spend has never been murkier or more important to get right.
  • To properly evaluate spend you need to make informed decisions based on the performance data you’re getting from them. The ad platform that demonstrates a clear return on investment is the critical partner to move forward with.
  • When thinking about ROAS (return on ad spend story), be sure the brand and agency are aligned on areas of focus and key performance metrics.
  • How a person shops on Amazon is very different from how they shop on Instacart or other similar apps. These are full-basket carts and are not very linear. These consumers are coming in and discovering productions and getting inspired. They also have a Using the tactics that you use on Amazon is not going to work on Instacart.
  • Don’t forget to explore new ways to connect campaigns at the point of purchase. Innovative campaigns use QR codes and other “phygital” amalgams to create a layered, seamless commerce experience.

These unique conversions of TV driving in-store, and driving digitally are paving the way for new strategies.