Latest / The CMO Podcast with Fexingo: Marketing Leadership, Budgets, and Executive Strategy / How CMOs Use Phygital Retail to Close the Online-Offline Gap
Transcript
- Lucas: You walk into a Nike store in SoHo. You scan a QR code on a sneaker display, and the product page appears on your phone with your size and color preferences pre-loaded from your app. You tap to try on — five minutes later an associate brings the exact pair to a fitting room. No hunting. No checkout line. You just leave with the sneakers, and the charge hits your Nike account. Luna: That's not a concept store. That's just a normal Nike store now. Lucas: Exactly. And that blurry line between online and physical — that's phygital retail. It's been a buzzword for a few years, but what's changed is that CMOs are now putting real budget behind it, and they're measuring it like a channel, not a one-off experiment. Luna: So it's moved from 'let's put an iPad in the store' to 'let's rebuild the store around the app.' What's the concrete case you're looking at? Lucas: I want to talk about Starbucks. In late 2025, they completed a refresh of about 400 pickup-only locations — those are the smaller stores that were originally designed for mobile order ahead, no seating, just grab and go. What they found was that customers who only ordered through the app were buying, on average, 1.2 items per visit. A coffee, maybe a pastry. Luna: Right. Low attach rate. They're not browsing. Lucas: So the refresh turned those stores into what they call 'sampling hubs.' They added a small curated display of packaged coffee, mugs, and a few food items you can actually pick up and look at before you grab your mobile order. The app integration: your order number pops up on a screen, but it also sends a push notification saying 'your latte is ready — and today's featured roast is on display by the pickup counter.' Luna: And did it move the needle? Lucas: Starbucks reported in their Q1 2026 earnings call that the attach rate for digital-only customers who visited a redesigned store increased by 23 percent. That's the specific number that caught my attention. Not foot traffic broadly — attach rate. People who were already coming in, now buying one more thing because of a physical trigger. Luna: So the physical store became a merchandising channel for digital customers. That's the inversion of the usual thinking — usually it's 'digital drives physical,' but here physical drives add-on purchase for digital. Lucas: That's the phygital insight. The CMO's job is to design the handoff between channels so that each one amplifies the other. And it's measurable. Starbucks tracks store-level foot traffic from app usage, scan rates of QR codes on displays, and cross-channel basket lift — how much more someone buys in a month after visiting a redesigned store versus just using the app at home. Luna: What about the tension? Because phygital often means you're asking customers to give up data — to scan a QR code, to open the app, to let you track them. How do CMOs navigate the privacy angle? Lucas: Sephora is a good example. They've had the Beauty Insider program forever, but in 2024 they started rolling out rfid enabled testers in their stores. You pick up a lipstick tester, the shelf detects it, and your in-store profile — linked to your loyalty account — logs that you tried that shade. Later, you get a follow-up email with a tutorial video for that specific product. Luna: That's quite a leap from just scanning a QR code. But does the customer know it's happening? Lucas: Opt-in only. The value exchange is explicit: 'let us help you remember what you tried, and we'll send you personalized recommendations.' Sephora's CMO said in a 2025 interview that the opt-in rate was around 34 percent — not overwhelming, but high enough to generate actionable data. The key is that the in-store interaction feels additive, not surveillance. Luna: So for a CMO considering a phygital investment, what's the first question they should ask? Is it about foot traffic, or about something else? Lucas: I think the first question is: 'What behavior do we want to change?' If the answer is 'get more people in the door,' then phygital might be the wrong frame. brick and mortar traffic is expensive to drive. But if the answer is 'increase basket size for our existing digital customers,' now you have a clear metric — attach rate, cross-sell ratio, or share of wallet. Luna: And you can tie that directly to revenue per square foot, which is the language the CFO speaks. Lucas: Exactly. And that's why phygital is getting real budget now. It's not about cool technology. It's about measurable lift in a core retail metric. Nike's own data, from their LA flagship store that opened in early 2025, showed that members who used the app in-store spent 40 percent more per visit than non-members. That's a number any CMO can take to the board. Luna: Forty percent is huge. But I imagine it's not just about the store design. It's about the entire data pipeline — the app, the loyalty program, the CRM, all feeding into a single view of the customer. Lucas: Right. And that's the technical lift that doesn't get enough attention. The store refresh is the visible part, but behind it, the CMO has to ensure that the tech stack can actually connect an in-store scan to an online profile. Many retailers still have separate systems for e-commerce and POS. Luna: So phygital forces a data unification project. That's a lot of internal friction. Lucas: It is. But the payoff is a richer customer dataset that improves not just the store experience, but all marketing — because now you can model what a customer looks like who shops both channels, and target lookalikes. Luna: That's a good note. Let me ask you this — we talk a lot on this show about how marketing is getting more measurable, more accountable. Does phygital actually deliver that accountability, or is it still a bit of a leap of faith? Lucas: It's getting there. The Starbucks number — 23 percent attach rate uplift — that's a clean, simple metric. But not every phygital initiative has that level of clarity. Some CMOs are still using proxy metrics like 'app downloads in store' or 'QR code scans,' which are activity metrics, not outcome metrics. Luna: The classic trap — measuring the thing you can measure, not the thing that matters. Lucas: Exactly. So the CMOs who are succeeding with phygital are the ones who define the outcome first — usually revenue per customer or basket size — and then design the experience to move that number. Luna: Speaking of measuring what matters — we've been running this show for over a hundred episodes now, always without ads, and that's something we're pretty deliberate about. We want the content to be the content, not a vehicle for someone else's message. Lucas: It's a choice that makes the show cleaner for listeners, but it also means there's no traditional revenue stream behind it. So if these marketing conversations have sparked something you've actually used — a framework, a metric, a case study — and you want to help keep it ad-free, there's a simple way. Luna: It's buy me a coffee dot com slash fexingo. That's it. No tiers, no perks, just a way to support the show staying independent. Lucas: And we mean it when we say no pressure. The show's not going anywhere. But for anyone who finds real value in it, knowing that a listener chose to chip in is genuinely motivating. Luna: Okay, back to phygital. One more angle I want to explore: what about returns? If a customer buys online and returns in store, is that a phygital opportunity? Lucas: Absolutely. Returns are a huge friction point. Warby Parker turned that into a feature — you order five frames online, try them at home, and return the ones you don't want at a store. But when you walk in to make a return, the store associate can offer a styling session or show you a new collection. The return becomes a traffic driver. Luna: So the return process itself becomes a marketing touchpoint. Lucas: Right. And that's the mindset shift: every physical interaction — purchase, return, even a browse — is a data-generating event that can feed the digital engine. The CMOs who get that are the ones who are reallocating budget from pure digital acquisition to store-level experience design. Luna: It feels like we're at an inflection point. For years, the narrative was 'digital is eating retail.' Now the narrative is 'digital and retail are merging, and the CMO has to own the merge.' Lucas: I think that's right. And the CMOs who are ahead are the ones who started the data unification work two years ago. If you're starting today, you're playing catch-up. But the good news is, the playbook is emerging — start with one metric, one store format, and prove the lift before scaling. Luna: That's a solid takeaway. One metric, one format, then scale. Lucas: And if that metric is attach rate or basket size, you'll have the CFO's attention. That's the bottom line.