PHY­GI­TAL - FIRST PER­SON

Ra­jiv Prakash, Next In - Growth Part­ners to En­trepreneurs

VMRD - - Contents - Smita Sinha

Phys­i­cal space is the new play­ground for Dig­i­tal. Phy­gi­tal, the merger of dig­i­tal and phys­i­cal ex­pe­ri­ences, of­fers ex­cit­ing op­por­tu­ni­ties for phys­i­cal re­tail­ers to stay rel­e­vant to their al­ways con­nected, dig­i­tally savvy con­sumers. Pow­er­ful, ex­pe­ri­ence-shap­ing tech­nolo­gies, ma­tur­ing of ar­ti­fi­cial in­tel­li­gence (AI) and emer­gence of phy­gi­tal star­tups make Phy­gi­tal an ac­ces­si­ble, strate­gic re­source to in­no­va­tive re­tail­ers to­day. “Do More At the Store” could well be­come the sur­vival mantra for re­tail­ers soon. Ra­jiv Prakash, Founder, Next In - Growth Part­ners to En­trepreneurs, shares his per­spec­tives with VM&RD on how and why Phy­gi­tal works and whether In­dian re­tail is ready to em­brace it. Defin­ing Phy­gi­tal

Phy­gi­tal is the idea of us­ing in­tel­li­gent and in­ter­ac­tive dig­i­tal tech­nolo­gies/me­dia to en­hance a con­sumer’s phys­i­cal shop­ping ex­pe­ri­ence in a blended fash­ion.

So far, dig­i­tal has al­ways been re­stricted to screens – com­puter screens, mo­bile screen, etc. But with phy­gi­tal, the idea is to make dig­i­tal go be­yond the screens and be­come part of the am­bi­ence of the phys­i­cal space in or­der to of­fer richer ex­pe­ri­ences to cus­tomers.

In re­tail, phy­gi­tal al­lows the con­sumer to “do more at the store” across all stages – dis­cov­ery, re­search, trans­ac­tion and feed­back. It in­cludes sce­nar­ios such as:

• Con­sumer be­ing recog­nised and of­fers and ex­pe­ri­ences get­ting per­son­alised

• Abil­ity to in­ter­act with mer­chan­dise to learn and ex­per­i­ment

• Recog­ni­tion al­low­ing for in­stant credit

• Faster check­outs through mo­bile point of sale units

• Abil­ity to pro­vide real-time feed­back on shop­ping ex­pe­ri­ence

In fact, the vi­sion for phy­gi­tal in­cludes shop­ping ex­pe­ri­ences that com­bine the con­ve­nience and per­son­al­i­sa­tion of on­line shop­ping with the rich­ness of phys­i­cal mi­nus the pain. An­other vi­sion is a sce­nario, which takes the per­son­alised shop­ping ex­pe­ri­ence at the tra­di­tional mom and popl store ie “ki­rana” and scal­ing it mean­ing­fully across a store net­work.

Phy­gi­tal is not a new name for Om­nichan­nel. Om­nichan­nel is the idea that a con­sumer should en­joy a seam­less shop­ping jour­ney across the dif­fer­ent dig­i­tal and phys­i­cal channels she uses. Phy­gi­tal fo­cuses on the phys­i­cal space, mainly the store and its vicin­ity, and is all about en­hanc­ing the cus­tomer’s ex­pe­ri­ence in the phys­i­cal space but blend­ing dig­i­tal into the phys­i­cal. “Prox­im­ity Mar­ket­ing”, “Phys­i­cal Web”, “Mixed Re­al­ity Ex­pe­ri­ences” are some of the terms one may hear in as­so­ci­a­tion with Phy­gi­tal.

In­dia and the Phy­gi­tal jour­ney

I would say that over the next two to three years, In­dia will wit­ness a lot of in­no­va­tive phy­gi­tal ex­per­i­ments and launches in the gro­cery, fash­ion and elec­tron­ics for­mats. There are in fact a num­ber of projects un­der­way in the In­dian re­tail in­dus­try by re­tail­ers and con­sumer brands to pro­vide a highly en­riched phys­i­cal shop­ping ex­pe­ri­ence-lev­er­ag­ing ar­ti­fi­cial in­tel­li­gence (AI) specif­i­cally ma­chine learn­ing, aug­mented re­al­ity (AR), in-store mo­bil­ity and In­ter­net of Things (IoT), etc.. Even in­ter­na­tion­ally, re­tail­ers are in a test and early adop­tion phase.

Phy­gi­tal pro­vides phys­i­cal re­tail­ers an op­por­tu­nity to be­come rel­e­vant in a dif­fer­en­ti­ated way to their con­nected con­sumers and in the process de­velop a new way of com­pet­ing with on­line re­tail­ers. Not just re­tail­ers, phy­gi­tal also is a great ex­pe­ri­en­tial mar­ket­ing op­por­tu­nity for con­sumer prod­uct brands in the FMCG, elec­tron­ics, home and other cat­e­gories.

Phy­gi­tal Ex­am­ples

As ref­er­ence points, re­tail­ers could ac­tu­ally do well to study Alibaba’s ‘Hema’ and the ‘Ama­zon Go’ phy­gi­tal ini­tia­tives.

Chi­nese e-com­merce gi­ant Alibaba’s cash­less, tech en­abled su­per­mar­kets chain Hema is aim­ing to re­de­fine the re­tail in­dus­try with fea­tures such as 30-minute home de­liv­er­ies with the store dou­bling up as a ware­house and home de­liv­ery ful­fil­ment cen­tre, fa­cial recog­ni­tion based pay­ment, per­son­alised rec­om­men­da­tions based on pref­er­ences and pur­chases etc. Hema largely de­pends on data to op­ti­mize the store’s of­fer­ings. Cus­tomers can down­load the store mo­bile app, scan

bar­codes through­out the store to find out a prod­uct’s ori­gin, de­liv­ery, and nutri­tional in­for­ma­tion, be­sides recipe ideas. The su­per­mar­kets also of­fer other ser­vices like chef-pre­pared dishes on de­mand us­ing gro­cery pur­chased at the store, noth­ing dig­i­tal about this though. Phy­gi­tal is not about in­cor­po­rat­ing dig­i­tal into ev­ery­thing. It re­quires a nu­anced ap­pli­ca­tion of dig­i­tal where it can im­prove the cus­tomer ex­pe­ri­ence and know­ing what to leave alone. In fact, sim­i­lar to Hema’s food se­vices, phy­gi­tal may some­times in­cor­po­rate new phys­i­cal only ex­pe­ri­ences.

Ama­zon Go is an­other ex­am­ple of lev­er­ag­ing data, ar­ti­fi­cial in­tel­li­gence and im­age recog­ni­tion soft­ware to en­hance cus­tomer ease and in-store ex­pe­ri­ence. The USP of the store is: ‘no lines and no check­out’. Cus­tomers can sim­ply scan their phones when they en­ter the store; the cam­eras and weight sen­sor track their move­ments and pur­chases and when the cus­tomers leave the store with their goods, they are au­to­mat­i­cally charged and the re­ceipt is sent to them on their Ama­zon ac­count.

A num­ber of on­line re­tail­ers go­ing off­line – Len­skart, Myn­tra, Ur­banLad­der, Pep­per­fry, Zi­vame­and the like -- are also blend­ing dig­i­tal tech­nolo­gies with phys­i­cal re­tail el­e­ments to pro­vide a seam­less cus­tomer ex­pe­ri­ence. Es­tab­lished re­tail­ers such as Fu­ture Group too have an­nounced their in­tent to in­te­grate phy­gi­tal into their core busi­ness model as part of their Re­tail 3.0 strat­egy.

Get­ting the right phy­gi­tal tech­nol­ogy mix

An im­por­tant part of the phy­gi­tal ex­pe­ri­ence lies in per­son­al­is­ing in-store ex­pe­ri­ences for cus­tomers and data plays a key role in this ca­pa­bil­ity. Re­tail­ers need a data vi­sion en­com­pass­ing data cap­ture, struc­ture, data driven de­ci­sion mak­ing, cre­at­ing data driven ser­vices/ prod­ucts and data pri­vacy. Much of magic of ma­chine learn­ing (as part of AI) lies in hav­ing the right data. Com­ple­ment­ing data is the in­creas­ing range of ca­pa­bil­i­ties be­ing de­liv­ered by ma­chine learn­ing. For in­stance, im­age recog­ni­tion al­lows for a wide range of phy­gi­tal use cases such as Hema store fa­cial recog­ni­tion pay­ments men­tioned ear­lier, per­son­al­i­sa­tion, bet­ter planogram­ming ad­her­ence, etc.

Apart from AI, there are sev­eral new tech­nolo­gies hold­ing sig­nif­i­cant prom­ise in de­liv­er­ing phy­gi­tal ex­pe­ri­ences. IoT tech­nolo­gies com­prise sen­sors that can de­tect and mea­sure a wide range of phys­i­cal prop­er­ties in a store which when com­bined with an­a­lyt­ics and con­trol sys­tems, al­low a store to be more re­spon­sive to in-store cus­tomer needs. AR pro­vides an in­for­ma­tion/in­ter­ac­tion rich phys­i­cal shop­ping ex­pe­ri­ence. Lev­er­ag­ing mo­bil­ity at the store al­lows for mo­bile point of sale de­vices which can help in queue bust­ing and even self check­out. Prox­im­ity tech­nolo­gies such as bea­cons and bea­con al­ter­na­tives such as the cus­tomer’s own phone al­low stores to sense, recog­nise and re­spond to cus­tomers bet­ter when they are near the store and at the store. From a dig­i­tal in­fra­struc­ture stand­point, adop­tion of 5G net­works and edge com­put­ing would al­low for rich, lag-free phy­gi­tal ex­pe­ri­ences at the store with­out sig­nif­i­cantly in­creas­ing the cost of net­work­ing. These are a il­lus­tra­tive set of tech­nolo­gies that en­able phy­gi­tal ex­pe­ri­ences.

These dig­i­tal tech­nolo­gies can not only aid in shop­per con­ve­nience but can also im­prove the qual­ity of store op­er­a­tions.. Fur­ther, phy­gi­tal so­lu­tions pro­vide an abil­ity to un­der­stand shop­per move­ment in a store whilst re­spect­ing pri­vacy. This de­liv­ers to a phys­i­cal re­tailer a pow­er­ful track­ing ca­pa­bil­ity that is sim­i­lar to how on­line re­tail­ers track vis­i­tors to their web­site.

The key chal­lenges

The tran­si­tion to a Phy­gi­tal model how­ever could be chal­leng­ing. Phys­i­cal re­tail­ers and prod­uct brands need to de­velop a dig­i­tal mind­set and ca­pa­bil­i­ties to lever­age dig­i­tal re­sources (tech­nolo­gies, ways of work­ing, busi­ness mod­els, etc). Their re­sponse to the e-com­merce and con­nected con­sumer op­por­tu­nity/ chal­lenge has demon­strated gaps in these ar­eas. Fur­ther, phy­gi­tal is a new con­cept and does not come with ready busi­ness cases and proven ROI mod­els. Adopters need to have the in­no­va­tive mind­set of a startup – fo­cus and un­der­stand­ing of cus­tomer needs/prob­lems, will­ing­ness to place bets, ex­per­i­ment, it­er­ate and make mis­takes, de­velop com­fort with dig­i­tal tech­nolo­gies and al­lo­cate cap­i­tal for phy­gi­tal in­no­va­tion with­out stan­dard ROI/ busi­ness case hur­dles. Lev­er­ag­ing the idea of open in­no­va­tion and part­ner­ing with phy­gi­tal star­tups could be an ap­proach to get­ting started.

In sum, phy­gi­tal al­lows con­sumers to do more at the store mi­nus the pain. Crack­ing the right model could pro­vide a sig­nif­i­cant ad­van­tage for phys­i­cal re­tail­ers and prod­uct brands. Suc­cess to a large part de­pends on un­learn­ing and think­ing and act­ing like a start-up.

“I would say that over the next two to three years, In­dia will wit­ness a lot of in­no­va­tive phy­gi­tal ex­per­i­ments and launches in the gro­cery, fash­ion and elec­tron­ics for­mats. There are in fact a num­ber of projects un­der­way in the In­dian re­tail in­dus­try by re­tail­ers and con­sumer brands to pro­vide a highly en­riched phys­i­cal shop­ping ex­pe­ri­ence-lev­er­ag­ing ar­ti­fi­cial in­tel­li­gence (AI) specif­i­cally ma­chine learn­ing, aug­mented re­al­ity (AR), in-store mo­bil­ity and In­ter­net of Things (IoT), etc..”

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