Where physical and digital intersect| Self-Service Innovation Summit 2021 | Retail Customer Experience

Astute retail observers already know that e-commerce has expanded consumer choices rather than replaced traditional brick-and-mortar.

Hence, the term “phygital,” defined as “the combination of digital products and services to deliver physical products or services,” has entered industry parlance.

And while major players like Amazon and Uber have taken the lead in educating people about “phygital” commerce, the revolution (or evolution) has taken many forms and created a wealth of opportunities for brands and retailers.

These opportunities and how to embrace them took center stage during a panel session, “Phygital: Where Physical and Digital Intersect,” at the Self-Service Innovation Summit last month in Hollywood, Florida. The panel consisted of an airline executive, a restaurant chain executive, a retail consultant and two retail technology providers.

Moderator Natasia Malaihollo, head of business at PopCom, introduced the session by defining phygital as noted above. And while the term is not yet widely used, Malaihollo — whose company deploys vending machines that allow users to browse inventory contained in the machines and outside the machines — said consumers have been using mobile devices to perform physical tasks for at least a decade. This includes everyday tasks like using a mobile phone to call a ride share or depositing a check in a mobile checking account.

‘Phygital’ emerges in different formats

Each of the panelists then described unique ways in which phygital commerce has emerged in today’s retail landscape.

Tom Ferguson, Jr. and Rebecca Faulconer agree a company requires employee buy-in to deploy phygical technology.

“The opportunities (are) to bring the phygital to create a better consumer experience, easier shopping for every person of every age, but not getting rid of your brick and mortar,” said Rebecca Faulconer, president of Retail Automation Consultants. “I think it’s a very exciting time to be in this industry.”

“People are shopping in a different way,” she said. “People of every age are open to delivery, using kiosks, using Uber Eats, curbside pickup.”

Malaihollo described the unique way in which PopCom combines physical and online shopping.

“We’re trying to merge the online store with the in-person shopping experience by deploying vending machines called PopShops that allow a customer to browse a product inventory — including products inside the machine and outside the machine,” Malaihollo said. “The machine can dispense products that are in the machine or will ship products that are not in the machine. We think we’re creating a new space that competes against (dedicated) brick-and-mortar stores.”

Pharmabox, which operates glassfront machines that dispense over-the-counter pharmacy products, is similar to PopCom in that the machine can dispense a product in the machine or allow the customer to order a product online that is not in the machine, said Alejandro Rodriguez, founder and CEO, Pharmabox.

COVID boosted the opportunity for Pharmabox significantly, he said, because the technology saved consumers from interacting with people directly.

“Sometimes people don’t like to touch something that other persons touched,” Rodriguez said.

A loss prevention tool

In addition, Rodriguez noted the role automated retail can play in improving loss prevention, a growing concern among retailers. The company is currently installing the Pharmabox machines inside of physical stores to help prevent theft.

If you go to Walgreens, CVS or Walmart today, certain items are locked in a glass cabinet, he noted. It is necessary to press a button to call a sales clerk.

“Sometimes the person never comes, so you have to wait 10 or 15 minutes,” he said. With the Pharmabox machine, the customer doesn’t have to wait for assistance.

Boosting employee culture

Besides improving the customer experience, retailers and brands have also looked to self-service technology to improve the employee experience.

Tom Ferguson, Jr., founder and CEO at Rise Southern Biscuits & Righteous Chicken, described how self-service technology has actually restored the art of cooking at his restaurant chain.

When online restaurant review services like Yelp came on the scene a few years ago, it “sucked the soul out of the chefs,” he said. Then food delivery came on the scene, another digital experience, further demoralizing the restaurant employees and culture.

“We knew that we had to really lean into technology for delivery; it was going to be a big part… but the thought process has been to look at it through the employees’ eyes.” The company focused on getting the employees to adopt the technology.

Meanwhile, the company eliminated its cashiers, giving customers the options of ordering online, ordering for delivery or ordering at a self-serve kiosk.

“Now we have a better culture in our staff than we did pre-technology,” he said. The technology has made their lives easier and enabled them to work more as a team.

United Airlines also deployed an employee focused program, said Rob Bence, the company’s director of digital technology.

When the airlines shut down in February of 2020, the company explored ways to be prepared when traffic returned.

“We looked outside of the industry,” he said. They saw how consumers were interacting at retail and put Elo touchscreens in its gates.

The airline instructed its agents that when they were not boarding a flight to go to a computer and allow customers to connect to them digitally using a QR code on their mobile phones. Customers could also connect to agents at the self-service kiosks.

“It took off,” Bence said. “You scan a QR code, you go to the kiosk, you are immediately connected to one of our friendly customer service agents.”

“It’s really changed the game… where it used to take hours to serve you, now it takes minutes. The catalyst was the pandemic.”

Rob Bence describes how United Airlines looked at what retailers were doing before deploying interactive self-service technology.

Employee buy-in

The panelists agreed that companies need to create employee cultures that support the technology.

“You have to take the time to understand processes today so that you’re insuring that you’re making improvements and that you have the buy-in from your team,” Faulconer added.

“These things change folks’ jobs,” added Bence. “We’ve seen a tremendous amount of collaboration in teamwork… our folks are now working together to solve our customers’ problems, and that was not even something we intended.”

“We said for every new process we gave them we were going to take two away,” added Ferguson.

Financial benefits

The panelists also agreed that phygital technology has improved sales and profitability.

Ferguson said the pandemic drove online ordering and delivery to 70% of the company’s orders. As a result, overall sales jumped 35% and profit jumped 100% to 300%.

This, in turn, has enabled the company to raise its salaries and benefits.

The company was initially worried that the technology would undermine customer service, Ferguson said, but the interaction of the expediter handing out the food became a more positive interaction.

“This technology was sucking the love of cooking out of everyone,” he said. “This (new company culture) has brought that love back to it. We’re living in a higher level of consciousness in our stores right now. Our customer service is way better than it was before.”

What’s next?

One characteristic of technology is that it forever changes.

Hence, Malaihollo asked the panelists about new innovations being developed.

United Airlines is moving technology into its lobbies and baggage claims, Bence said.

Rodriguez is working on drive-thru pickup machines that deliver product to the customer with a robotic arm. There is also a system where a camera inside a store follows the item picked up from a machine to the checkout counter, he said. If the shopper leaves the product, an alarm sounds.

Ferguson said his company is working on a more robust rewards program which he said will create new marketing capabilities.

Consumer privacy concerns

On the question of protecting consumer privacy, Faulconer said blockchain service providers are able to tailor customer information in ways that protect consumer privacy.

Ferguson said the platforms that he uses require the customer to opt in to rewards and marketing programs.

Rodriguez said the customer data his company collects is not personal identity information but general demographic information and is only used internally.

PopCom collects engagement information at its machines such as how long people are shopping and what products they are buying and what ads are getting the best results, Malaihollo said.

Customer adoption

What findings on technology adoption are challenging and surprising?

Ferguson said adoption is greater in urban areas and younger and professional consumers are more tech savvy.

Faulconer agreed adoption in urban areas is faster, but added that technology is being targeted to new demographics today, so adoption is expanding more demographically.

Bence said self-service devices are being used the most by international travelers. He also said people who are not savvy with the use of phones are using the self-serve kiosks more.

Asked how big the phygital space will grow, and what are the challenges to adoption, Faulconer said one limitation is the number of available locations.

“You have to be willing to run proofs of concept,” she added.

For example, the Proactiv skin care product kiosks worked well in malls but not in airports, she said.

Where to begin

How does a retailer begin their phygital journey?

Faulconer said retailers should identify their pain points before selecting the technology to introduce.

“Where is your audience, are you in a location that’s scalable, do you have some strategic (location) partnerships that allow you a faster growth opportunity?” Faulconer asked. “There are a lot of questions to go through to get to the questions that get you the answers you want. I think the companies that take the time to understand the strategy and understand their end goal are going to have the ability to scale in a much more rapid way.”

Bence said it’s important to have a process to test different solutions quickly. It is also important to collaborate with technology partners.

“That co-labor is important,” he said.

Malaihollo agreed it is important to run pilot tests and lose money upfront.

“Phygital is the future…everything is going to be over the phone,” Rodriguez said.

Photos by Willie Lawless.