The Rise of Phygital in Luxury

The luxury industry has been on a tumultuous journey in the past two years, grappling with pandemic-related store closures and event cancellations. After dipping in 2020, the industry grew at around 13-15% in 2021 to €1.14T, with the personal luxury goods market valued at €288B, according to Bain & Company. The industry has also been forced to adapt to disruptive technologies and the resulting changes in consumer preferences. But luxury players have been leveraging a unique strategy to woo consumers and tap into new markets. 
Enter “Phygital”, the term which is a mash-up of “physical” and “digital”, was coined more than a decade ago by advertising executive Chris Weil but is now back in the spotlight. Phygital allows consumers to experience the best of what physical and digital have to offer, allowing brands to meet the consumer where they are and engage with them on their own terms.
From Balenciaga to Burberry
From video games to fashion shows to social retail stores, luxury brands have interpreted phygital in unique ways: 
Balenciaga: The Spanish luxury brand released a retro video game titled Afterworld: The Age of Tomorrow to showcase its fall 2021 collection. The game, which immersed players in the brand identity using 3D capture and Epic’s Unreal Engine, was well received. According to figures from the shopping app Lyst, 48 hours after the game’s release, searches for Balenciaga on Lyst rose by 41%.
The brand also partnered with the popular online game Fortnite in Sep 2021 to launch outfits priced at around US$8.
In Jun 2022, Meta’s CEO, Mark Zuckerberg, launched the Avatars Store, where users can dress their avatars with outfits from luxury brands such as Balenciaga, Prada, and Thom Browne. 
Chanel: Chanel, which staged a phygital fashion show for its Pre-Fall 2021 collection, was viewed more than 1.5M times on YouTube, nearly five times the number of YouTube views of its digital-only Cruise show in Jun 2020. According to Launchmetrics, which measures a fashion show’s Media Impact Value - an algorithm that translates placements and mentions via social media engagement to a monetary value, when successful, phygital shows can have six times the impact of digital-only experiences.
Burberry: British fashion brand Burberry unveiled its “social retail store” concept in Shenzhen, China, in Jul 2021. The store fuses the world of social media and real-life shopping to create a truly interactive experience. The store, which is powered by Chinese tech giant Tencent, allows customers to collect “social currency” to unlock exclusive content and personalised experiences in-store using WeChat. 
Hermès: French luxury brand, Hermès recently filed for a trademark application with the United States Patent and Trademark Office (USPTO), which relates to Web3 technologies, including downloadable software which can display, store and manage virtual goods, digital collectables, cryptocurrencies, and of course, NFTs.
Bulgari: The Italy-based luxury fashion brand launched Octo Finissimo Ultra, the thinnest mechanical watch in the world at 1.8mm in thickness, with an engraved QR code that directs to an NFT representing digital art. Only ten pieces were produced at the cost of US$440,000.
Balmain: Founded by Pierre Balmain in 1945, the French high-end fashion brand recently collaborated with Barbie to launch the Barbie x Balmain-branded apparel, along with three NFTs, sold between US$12,490 and US$21,379.
By 2025, it is anticipated that online will become the leading channel for luxury purchases, and Gen Y and Z will become more dominant in luxury, representing 70% of global purchases. Digital assets and the metaverse are expected to grow rapidly, comprising 5-10% of the luxury market by 2030. Luxury-branded NFTs alone could become a US$56B market by 2030.
By harnessing these disruptive technologies, luxury brands can craft unique digital experiences for their customers and appeal to a younger audience. 
CIDA- Circular Industrial Design Accelerator
Luxury brands are striving to become more sustainable and phygital. However, they usually pursue these goals separately and encounter high costs because they lack the specialized expertise and resources to manage a multitude of diverse and independent stakeholders.
For this reason, we at CIDA have built a web3 platform that enables cost-efficient matchmaking, development, and commercialization of circular luxury products. Within our transparent creator community, we use future technologies such as AR and dynamic NFTs to create phygital product experiences.