Phygital: The Digital-Physical Bridge To The Metaverse

In a Nutshell…

• The phygital metaverse describes next-generation value exchanges using sensors, mobile devices, extended reality (XR), and social networks that create a seamless experience between people, places, and things.
• Phygital is anticipated to grow on a mass scale in the next few years and will transform how we perceive and interact with the world in front of us.
• Phygital is a complete cycle that strengthens and improves the physical experience using hybrid virtual spaces. With the metaverse on the virtual horizon, we predict that 'phygital' will go through a seismic shift, sparking a new wave of creativity, imagination, and ingenuity.

Phygital is a portmanteau of ‘physical’ and ‘digital.’ It’s the concept of using technology to bridge the digital world and physical reality by providing unique and interactive experiences for users.

The phygital metaverse describes next-generation value exchanges using sensors, mobile devices, extended reality (XR), and social networks to create a seamless experience between people, places, and things. Metaverse technology can even transform physical objects into digital assets. 

By definition, the metaverse is a phygital experience in itself. Although still in its infancy, the implications for the phygital metaverse are huge. In the future, we can expect highly interactive and personalized online consumer interactions that take full advantage of the range of technical features the metaverse has to offer.

With digital-first initiatives transforming global industries, the lines will continue to blur between physical and digital to create new exchanges that reimagine our relationship with technology. Morgan Stanley calculated that in 2021, the metaverse market represented $8 trillion. Consumers clearly have an appetite for 3D eCommerce and increasingly immersive shopping experiences. Statistics from Shopify reveal that products sold online that use 3D and AR technology have a 94% higher conversion rate.  

The data suggests that consumers are craving more expansive online interactions, which opens the door for new phygital exchanges that fully utilize functional technologies.   

This article will examine how the phygital metaverse works and its potential applications for businesses, consumers, and metaverse users.

What Is Phygital?

Phygital is a term used to describe the use of technology in the physical world and not just about using technology as an enhanced means of communication. It also concerns how we interact with it and its effect on society. Phygital allows businesses of all sizes to connect with customers in new ways to achieve brand equity. 

The digital economy is booming thanks to new and emerging technologies such as augmented reality (AR), virtual reality (VR), and mixed reality (MR). Estimates of the global digital economy range between 4.5% to 15.5% of world GDP, with digitally deliverable service exports amounting to $2.9 trillion, according to a report by UNCTAD. 

The impact of digitalization has permeated across industries beyond the information and communication technology sector, with tangible implications for finance, retail, transportation, and hospitality, among many others. With the advancement of technology and increased access to the Internet, these trends are expected to persist.

The Harvard Business Review believes that phygital metaverses will soon become a major part of our lives. In their book, “The Future of Work,” phygital is defined as “the use of information technology to transform the world around us.” Advanced technologies such as augmented reality (AR), virtual reality (VR), and artificial intelligence (AI) power the metaverse and serve as the basis for next-gen immersive experiences.

Another way to describe phygital is as an extension of the real world. For instance, if you were to walk down the street, you would probably notice digital screens on display, including billboards, kiosks, digital advertisements, etc. These are all phygital extensions of the real world that blend together seamlessly. In the future, IoT objects will sync with their digital twin counterparts in the metaverse and become even smarter. 

Smart IoT devices represent the future of the phygital and have many applications, from retail digitization to industrial control systems and mechanics. Phygital is anticipated to grow on a mass scale in the next few years and will transform how we perceive and interact with the world in front of us.

Commercial Sector Use Cases 

The metaverse takes consumer experiences to the next level by providing an immersive playground that acts as a digital bridge between the physical and virtual worlds. In the metaverse, you’ll be able to effortlessly interact with real-world objects, displays, and IoT devices that also exist virtually. 

The commercial sector is one of the most prominent use cases for phygital metaverse experiences. Retail and eCommerce in the metaverse are set to accelerate dramatically in the next few years as consumers look for more convenient and interactive ways to shop. And as technology adoption increases, it will prompt even more experiences that merge online and offline shopping together.

In this context, the metaverse will host businesses, brands, and creators in a virtual representation of the real world. Digital twins of brick and mortar stores can be hosted in the metaverse and used to create a virtual model of customers. These digital replicas can gather user data from online shopping habits, which enhance physical shopping experiences.

Imagine walking into your favorite clothing store and receiving personalized recommendations from virtual shopping assistants that know your exact measurements and preferences. With phygital technology, you can add in-store items to your virtual cart and then have them delivered to your home on the same day so you’d don’t have to carry them around. All of the clothes you purchased are also now NFTs that your avatar can wear in the metaverse. 

This shift represents a much fuller journey and completes the customer experience from end to end by providing consumers with valuable interactions at every level. As digital fashion expands beyond gaming and into the mainstream, retail stores and luxury brands have an opportunity to create unique virtual storefronts inside the metaverse that take full advantage of digital technologies. 

Phygital: At Scale

Think of the metaverse as a digital playground that brands, businesses, and individuals can use to sell, trade, socialize, and communicate in a persistent virtual environment. Add phygital to the equation, and you have large-scale, interconnected spaces that disseminate information to both physical and virtual locations in real-time.

The phygital shift gives rise to smart interactions with IoT devices connecting people, processes, data, and things. This networked connection is referred to as the internet of everything (IoE) and has significant implications for our future. Gartner named IoE as one of the most transformative innovations all the way back in 2012, and now, the metaverse is primed to replace IoE and change the paradigm once again.

Digital twins, assets, objects, NFTs, and virtual agents will all reside in a fully interoperable metaverse that could one day impact every aspect of your life. Smarter IoT devices with real-time metaverse integration will give us much higher levels of ease and comfort. In this context, the metaverse will be the motherboard connecting and uniting all of our devices, thus enhancing our overall virtual experience. 

At scale, phygital technology combined with the power of the metaverse will revolutionize everything from agriculture to manufacturing. Imagine if businesses could record consumer purchases in real-time and feed that information back to suppliers to automate production lines and streamline efficiency. 

For instance, businesses can use enhanced computer models to operate industrial digital twins to monitor real-world components, replicate processes, and collect data that predicts performance metrics. The applications for digital twin technology in a phygital context are huge. They include increased reliability of equipment and production lines, improved overall equipment effectiveness (OEE) through reduced downtime, enhanced productivity, and reduced risk in various areas, including product availability and marketplace reputation.

Enterprises and governments can build digital twins and virtual 3D replicas for systems we depend on, like power grids, server farms, and other critical infrastructure. Factories with digital twins in the metaverse can use augmented reality (AR) to engage with interactive engineering models and digital overlays on top of physical equipment. This allows them to take advantage of the most up-to-date and accurate information and ensures that maintenance and performance best practices are consistently upheld. Businesses can also apply phygital methods to industrial control systems (ICS), factory machines, and work cells. 

A Phygital World: Are We Ready?

Phygital is a complete cycle that strengthens and improves the physical experience using hybrid virtual spaces. With the metaverse on the virtual horizon, we predict that 'phygital' will go through a seismic shift, sparking a new wave of creativity, imagination, and ingenuity.

Digital twins and phygital objects will help build the foundations of the industrial metaverse, which opens up a discussion about how smart cities of the future will operate. The metaverse could host data-driven cities that use intelligent systems, signifying an ambitious shift towards techno-urbanism. Smart city initiatives are already underway in many metropolitan areas around the world, including the South Korean capital of Seoul.

Seoul is undergoing a digital transformation on a city-wide scale that promises to be the first metropolitan government with a full-service virtual world. Park Yun-Gyu, Head of Communication at the South Korean Ministry for Science & ICT, said in a recent statement.  “It is important to create a world-class expanded virtual world ecosystem as a starting point for intensively fostering the expanded virtual world.” 

A range of public services will be available in the Seoul metaverse by 2023. A virtual city hall where citizens can meet avatars of public officials is in the works and will go a long way in making public services more accessible. Citizens will also be able to file other types of administrative requests including booking library meeting rooms or tennis court slots. One of the biggest advantages of a virtual city hall is its capacity to overcome time, space and language barriers. Citizens can even use cell phones connected to IoT to visit cultural sites virtually if they can’t be there in person. This is particuarly important for vulnerable communities such as disabled redients who can enage with public services safely and conviently. 

It’s compelling to think that one day soon, a city of almost 10 million people will have smart infrastructure and super-personalized experiences powered by the combined might of the metaverse, Web 3.0, IoT, and phygital technology. One question still remains. Are we ready to embrace a world powered by smart technologies, interoperability, and mass technology integration? The data points to yes.

According to Statista, smart infrastructure is the largest segment of the global smart city market, with revenues worldwide forecast to reach more than 70 billion U.S. dollars in 2021. This constitutes a market share of almost 55 percent for intelligent infrastructure within the global smart city market. These numbers show the increasing importance of the digital format, which will one day become the backbone for persistent, virtual worlds based on our own. 

The world as we know it is quietly undergoing a technological transformation as businesses and consumers invest more time and money in the metaverse. Developers are already discovering new applications for phygital technologies that will rewrite how we communicate and interact forever. For example, tech firm Magik Book created a unique Phygital marketing strategy with their interactive book series. Theory designed a physical marketing catalog for Porche which was displayed in car showrooms.The Magik Book digitally connects to an iPad, and as consumers flip through the pages, related content is displayed creating a unique phygital approach. 

The retail sector is undergoing an industry-wide transformation and adopting new technologies that enrich and enhance the customer journey. Read our article, “Retail Digitization in the Metaverse,” to discover the metaverse's effect on the retail sector and its associated implications for future shopping experiences.