Brands such as Mercedes-Benz, Ferrari, Nike, Adidas and eBay are actively working on it: linking physical products to virtual ones. It is the new trend in marketing land. But what are phygitals and what can you do with them as an organization? This article explains everything about it. The concept of phygitals has been around since 2007 and was coined on the other side of the world, in Australia. In the original context of marketing communications, it refers to building relationships with customers in both the physical and digital worlds. Due to the emergence and possibilities of NFTs (and underlying blockchain technology), it suddenly becomes very easy to facilitate this and more and more organizations are using this.

For example, several major brands have started connecting physical goods with virtual counterparts in the past year. This has revealed interesting use cases:

1) Post-purchase marketing of a product or service

When you purchase a physical item, you will receive an NFT associated with it. With that NFT you can then unlock all kinds of unique experiences online. A nice gimmick for the customer and it is very interesting for the company, because they can generate a lot of interesting data after the purchase.

2) Mapping secondary sales

By linking physical products to NFTs using NFC chips, brands can track secondary sales, new owners, and general holder behavior.

3) Authenticity and traceability

I previously wrote about the scale of counterfeit products in Europe, which according to the OECD amounts to more than $500 billion per year. From fish and chicken, sneakers to bags. You can check authenticity with phygitals. This is done by scanning a RIFD or NFC chip, which is connected to a virtual variant and with which the authenticity can be checked

4) Limited editions

This includes publishing (selling or raffling) unique physical and virtual collections for, for example, a loyal fan base. The most diverse combinations are possible here. Only fans who have purchased a physical item can purchase (or receive) a virtual version and vice versa.

Nike: co-creation, gamification and phygitals

There are already many brands that have fully delved into phygitals. Nike launched the virtual “OurForce 1” collection on its blockchain platform SWOOSH. The reason for setting up this platform according to the brand:

Those champions athletes and serves the future of sport by creating a new, inclusive digital community and experience and a home for Nike virtual creations.

This collection is part of a competition where Nike fans were invited to design a futuristic virtual shoe. Only participants in this competition were allowed to purchase a special physical sneaker at the end of last year, which the brand launched separately for this purpose. A wonderful example of the convergence of co-creation, gamification and phygitals.

Nike never viewed technology as simply another channel for transactions, but rather a means of creating an ongoing connection with their customers, while also connecting their customers to the community. – Doug Stephens, retail futurist

This is not a jpeg

The brand is constantly launching phygital projects, such as recently the ‘Air Force 1 Low TINAJ’, where TINAJ stands for “This is not a jpeg”. A nod to how many people are still looking at NFTs.

The plans for the SWOOSH platform are great. Not only do you get unique access to special events with athletes, but you can also wear the virtual clothing in games, for example. You can also download the 3D drawings so that you can personalize them further. More than a billion dollars worth of virtual clothing from the clothing brand has already been traded.

Dior & Ralph Lauren: phygital shoes

Dior also worked on phygital shoes and launched a line of sneakers with a digital twin on the blockchain. An NFC chip is built into the right sole of the physical shoe, which allows the authenticity of the shoe to be verified. You can also view the different steps in the production process and receive a notification when a new collection is available.

Clothing brand Ralph Lauren went one step further and launched its own (virtual) island within one of the most popular gaming platforms; Fortnite. Here users can play the Race to Greatness game and win fun virtual goodies. To participate in the race in style, users can purchase a digital pair of shoes from the clothing brand, which cost $15. There is also a limited edition of a physical variant.

Safes and suitcases

Although most clothing brands started their virtual journey with sneakers, more and more special items are being phygitized. Louis Vuitton, for example, launched a Treasure Trunk. A virtual suitcase that retails for $39,000 each.

People who think they can make quick money by buying a suitcase and selling it for a higher amount will be disappointed. There are all kinds of new options to prevent this ‘flipping’. I previously wrote about ‘solbound tokens’; tokens that you cannot resell.

This is useful if, for example, you want to save a diploma or other certificate, which DUO is now experimenting with. But also with unique virtual items, which as a brand you want to really remain the property of a fan and not be used for speculative trading.

Convert Gucci Material NFT into physical product

Gucci has also shown a very nice use case of phygitals. The brand offered holders of a Gucci Material NFT the opportunity to exchange it for a physical Gucci product, such as a bag or wallet, at no cost. These NFTs could be won in the game Battle Town, where Gucci had set up a virtual fashion store.

FIAT & Mercedes

By the way, it’s not just clothing brands that have discovered all these cool possibilities. The most diverse use cases are now being developed and launched by companies. For example, car manufacturer FIAT has put its loyalty program on the blockchain and launched the FIAT Pass, a digital loyalty card that offers all kinds of benefits. Fellow Mercedes wants to store things such as title deeds and rights of use of their cars as NFT and has already applied for patents for this.

Physigals also make unique collaborations possible; clothing manufacturer Adidas, for example, collaborates with car manufacturer Bugatti. They launched a special collection of shoes, inspired by Bugatti design. You will immediately receive a virtual version of this, which gives you access to the Adidas Collect Web3 platform.

Penguins & Passports

Another special technological step further?Pudgy Penguins shows it. It sold 20,000 phygital penguins in one day via Amazon. Physical hugs, which are linked to a virtual variant. You will receive a birth certificate, which gives access to the virtual environment. Here you can further customize the penguin to your liking, play penguin games and communicate with other owners.

Now I understand that many organizations think; this is still a bridge too far. This does not suit my target group or a virtual experience is not of much use at the moment. Yet it certainly makes sense to think about it, for example if you make clothing, shoes or another type of textile. From 2027, you must add a ‘Digital Product Passport’ to every product in the EU.

This is part of the European ‘Green Deal’. Each product passport contains information about what materials the product consists of and where it comes from. To accelerate the circular economy, it should also contain information on how the product can be used, discarded, reused or recycled.

Some manufacturers have already taken a big step in this, by working together within the AURA blockchain consortium. Not only all brands of the LVHM Group are collected here (Louis Vuitton, Bulgari, Cartier, Dior, Prada), but also companies such as Mercedes Benz.

Get started yourself & what’s next

If you want to get started with this yourself, it is not only worthwhile to look at the cases of the previously mentioned brands. But also look at the parties that technically facilitate all this, such as Boson, Web3Sense and Addressable.Ciety is a super cool platform where you can easily create your own collection of merchandise, linked to a virtual variant and online environment.

Due to the rapid developments in the field of phygitals, but also blockchain and metaverse, I expect many more cool developments in the coming year. The UX of many solutions is getting better and better, so that the user no longer even realizes that they are using certain technologies (such as blockchain, NFTs, etc.).

As I wrote a few times over the past year here on Frankwatching about the metaverse; Generation Z and Alpha are not only often used to virtual experiences, but also increasingly prefer them to physical experiences.

I see this rapidly changing from a fun gimmick to an important part of both the marketing and the ecosystem surrounding a brand.