What Is 'Phygital'? The Blending Of Physical and Digital

Technology is evolving rapidly. As a result, we are beginning to see the implementation of phygital goods and experiences from brands across various industries. But what exactly does phygital mean?

Phygital is the combination of physical goods and experiences with digital ones. Phygital entails utilizing technology to create a seamless customer experience. The term generally refers to retail experiences and marketing strategies. An online version of a store is an example of something phygital.

As technology continues to evolve, it’s crucial that we understand a term as important as phygital and what it could mean for both brands and consumers. With this in mind, let's explore this unique relationship between physical and digital.

Combining physical and digital goods to enhance the consumer’s experience is nothing new. 

The term itself was coined in 2007 by Chris Weil, Chairman-CEO at Momentum Worldwide, to describe the connection between physical and digital ecosystems where all brand experiences lie.

At the time, phygital was a concept that highlighted the great potential for brands to engage with consumers using both physical and digital means. In 2007, brands and consumers had only just begun to explore this innovative concept. 

The 2020 pandemic is what really accelerated this blend of physical and digital worlds. Considering many of us were separated from our friends, families, and co-workers, we lacked social interaction.

That being said, technology was there to save us. Through the use of virtual meeting software and other forms of digital communication, the global economy was able to carry on despite being in the midst of a global crisis.

This crisis didn’t just open a new door for communicating with our loved ones, it also opened up new opportunities for brands to unite with consumers on a much larger scale.

Without a doubt, the pandemic has changed the way we think as humans, as well as what we view as acceptable in terms of consumption. The way we shop, dine, and participate in events has permanently changed.

We buy most of our goods online, we order food through an app, and we attend important meetings and conferences through a screen. And this is just the beginning of what a truly phygital economy will look like. 

Now with the implementation of blockchain technology, we have access to trustless networks that allow us to interact without the need for an intermediary and prove ownership of digital goods via NFT technology.

Overall, the goal of “going phygital” is to enhance consumer experiences by enabling brands to build more meaningful relationships with their community, in a seamless way.

The immense opportunity provided by the phygital concept is exciting, to say the least. However, that’s not to say that with its fair share of benefits, there aren’t also some drawbacks to consider. 

Pros of Going Phygital

• Seamless consumer experiences. The incorporation of digital experiences in conjunction with physical have led to great success. Self-checkout stations at the grocery store, apps for ordering food or a ride, and QR codes to gain access to IRL events have all led to brands creating a more seamless experience for their consumers.

• Speed and convenience. In a world where we want everything fast and with little effort as possible, speed and convenience are valued now more than ever. Whether you’re ordering your food ahead of time using your phone or buying a product that’s halfway across the world, the implementation of phygital user experiences provides us with the speed and convenience we’re all after.

• Meaningful B2C relationships. Brands now have the ability to offer consumers a more complete experience, hence fostering a more meaningful B2C relationship. Before intertwining physical and digital goods and experiences, brands relied solely on physical presence and data. Not only can this be difficult to scale, but the consumer experience is neglected as a result. But, with a steady flow of consumer-centric data from social media and other online platforms, brands have an opportunity to provide exactly what consumers desire in a quick and efficient manner.

Cons of Going Phygital

• Lack of human contact. Although technology can be used to create a better consumer experience, it can also have the opposite effect. If you’ve ever called a customer support line just to be greeted by an unhelpful robot, then you know exactly what I’m talking about. This concern extends beyond receiving unhelpful customer service though. It’s possible that technology becomes so optimized that we actually prefer it over in-person interactions (in some cases, we’re already there).

• Requires consumers to be tech-savvy. The combination of physical and digital is great. Except for those who aren’t tech-savvy and have little desire to be. There will always be people who go against the grain and refuse to participate in the phygital transformation of our economy. However, I believe this concern is minimal, and it will likely dissipate as new generations are raised in a phygital world.

• Privacy and security concerns. Considering the internet (and now the blockchain) is full of data regarding consumer behavior, there is a legitimate concern for our privacy. Furthermore, with more devices being connected to the internet daily, there’s an even greater risk of being hacked and having your identity stolen. Of course, more technology is being implemented to reduce certain security risks. 2FA, biometrics, and private keys are all being utilized to keep our privacy secure. But is it enough?

The concept of phygital that we know today is set to function differently in the near future. By implementing NFT technology, brands now have the ability to token gate access to exclusive content, products, events, and other benefits a brand might want to offer to specific consumers.

In fact, many well-known brands have already begun using this concept that I like to call phokengate (phygital + token gate). Here are some of the most prominent examples of these phokengated experiences.

In an attempt to connect brands with consumers in a special way, Shopify has developed a way for merchants to connect with fans and increase their sales by offering exclusive merchandise to NFT token holders only.

Shopify dubbed this new initiative as “token gate”, and is currently available in beta mode. Vendors can create their own token gate shop directly on the Shopify app or add it directly in-store. 

As a buyer, you have to connect your web3 wallet and verify you own an applicable NFT to shop the merchandise and gain access to exclusive events.

Another brand that was able to provide NFT holders with exclusive token gated perks is the American luxury jewelry and specialty retailer Tiffany & Co.

Tiffany successfully launched and sold 250 NFTs that come with a physical pendant. Not only was each phygital product priced at 30 ETH each (approximately $51,000 at the time), but you had to be a CryptoPunk NFT holder to purchase one.

As a result, each pendant is being crafted by Tiffany & Co. artisans to resemble each owner’s Punk NFT.

That means everyone who bought one of these custom pendants receives a digital and physical product that resembles their existing digital asset—providing Tiffany with more sales, and consumers with greater value—especially considering the current price to buy one of these NFTs is sitting at 50 ETH (about $77,800 at the time of writing this).

RTFKT is a prime example of a brand that is taking phygital token gating to the next level. This virtual fashion company recently announced their collection of 10 token gated Fashion Collections that are only accessible to Clone X Avatar holders. 

As a holder, you can unlock NFT wearables and Forge Premium Physical items including t-shirts, hoodies, jackets, and sneakers.

RTFKT's Forging Mechanic enables holders to redeem exclusive physical items based on their NFT wearables. Moreover, Clone X Forging allows Clone X holders to unlock their Avatar's entire wardrobe, making it the first fully phygital collection released by a brand.

Phygital token gating isn’t limited to just big-name companies. Personal brands and creators also benefit from this unique correlation of digital, physical, and exclusivity.

English artist, entrepreneur, and art collector, Damien Hirst, has also experienced great success with this new concept with the creation of his art project called The Currency.

After the initial launch of this NFT-based art collection, collectors had one year to decide between owning the digital NFT or the physical piece of art. Depending on what collectors chose, after the one-year mark, the leftover physical and digital NFTs were burned.

The final supply resulted in 4,851 NFTs and 5,149 physical artworks remaining.

Ultimately, the concept of phygital goods and experiences is still evolving. As brands learn how to implement new technologies like blockchain and NFTs, we will see even greater growth in each industry and how they use the phygital concept.

Here are a few examples of what we can expect to see in the future.

• Phygital Goods. In terms of phygital goods, they will continue to evolve. Using NFT technology, there won’t be a single product that doesn’t come with both the physical and digital versions. The physical version will serve its purpose per usual, whereas the digital portion will be used to prove ownership, provide authentication, and reward holders with exclusive perks for owning the product.

• Phygital Access. Gaining access to events will never be the same. The blockchain provides a true and transparent ledger to the public. As a result, creating fake tickets will soon be impossible once an NFT ticket system is utilized by theme parks, concert houses, movie theatres, and even airlines.
  
• Phygital Records. With the implementation of non-transferable Soulbound Tokens (SBTs)—medical offices, lenders, and other government entities such as the DMV, will utilize digital assets to provide their patients, borrowers, and law-abiding citizens with the physical assistance they need, but in a more efficient manner for the best experience possible.

Ultimately, phygital is the combination of physical and digital products and experiences aimed to create a smoother experience for both brands and consumers. Phygital isn’t limited to just the consumer market, it will soon be utilized by healthcare, finance, and government-based entities as well.

What do you think? Will the concept of going phygital eventually be the new norm? Or perhaps it already is? Let us know your thoughts.