Crossing the Phygital frontier

Published in

DappFuse

4 min readJan 24, 2024

Traditional Web2 companies face unique challenges in adopting Web3, particularly in the burgeoning ‘phygital’ space, where physical and digital experiences converge. This article examines these challenges and provides insights into successful strategies, drawing from industry examples.

Challenges to leverage phygitals

Web3 is characterized by decentralized platforms and technologies like blockchain and NFTs. Phygital experiences represent a fusion of real-world items and digital assets, offering interactive and immersive experiences that transform marketing and consumer engagement.

Creating phygital experiences necessitates an investment in emerging technologies like AR and VR. A lack of in-house expertise in these areas can be a significant hurdle. The phygital approach requires innovative marketing strategies that blend digital and physical elements. Successful entrants minimize the transition cost by finding the tools that best work with their existing stack: solutions like Boson and — of course — Dappfuse.

The regulatory framework around blockchain, NFTs, and digital assets is still evolving. Web2 companies venturing into Web3 must navigate these uncertain legal waters, particularly concerning intellectual property rights and compliance with emerging regulations.

Adopting a Web3 mindset involves a cultural shift towards decentralization and community-driven approaches. Educating customers about the value and usage of phygital products is a crucial yet challengingaspect of this transition.

Notable Examples

The partnership between Bugatti and Adidas has produced a very limited set of branded sneakers, sold primarily as a phygital that can be redeemed for its “physical pair.”
Tiffany & Co introduced a unique phygital rewards system with their CryptoPunk pendants. By offering CryptoPunk holders the chance to transform their NFTs into physical jewelry, Tiffany & Co. successfully merged the digital and physical luxury markets.
Nike’s RTFKT Cryptokicks iRL Sneaker Collection: Nike-owned blockchain sneaker startup RTFKT Studios announced the launch of Cryptokicks iRL, a sneaker collection that represents RTFKT’s vision to blend the digital and physical worlds. This collection builds on Nike’s CryptoKicks, a digital-only collection of customizable NFT sneakers. Cryptokicks iRL is RTFKT’s first Web3 sneaker incorporating blockchain with smart technologies, including auto-lacing, enhanced lighting, haptic feedback, walk detection, and AI algorithms. The collection is limited to 19,000 pairs, sold as digital collectibles with physical counterparts in four unique color combinations. Going beyond sneakers, RTFKT launched 10 token-gated Fashion Collections accessible to its Clone X Avatars collectors, enabling them to unlock NFT wearables and Forge Premium Physical items like hoodies, jackets, t-shirts, and sneakers. This collection, known as Clone X Forging, is the first fully phygital collection released by RTFKT.

Takeaways

The key details that contributed to the success of these campaigns include:

Limited Editions and Exclusivity to drive demand
Providing unique and completing experiences in both the digital and physical experience that go beyond the ownership of the items themselves
Effective marketing strategies, including hype generation on social media and through influencers, significantly increased visibility and desirability.
Focusing on the consumer experience, both in the digital and physical realms, ensured a seamless and enjoyable interaction with the products and brands.

For Web2 companies, venturing into Web3 and the phygital space is fraught with challenges but also ripe with opportunities. These brands were successful despite leveraging a new and complex technology that may be new to their audience. Success in this new era requires a deep understanding of Web3 technologies, innovative marketing strategies, careful navigation of regulatory landscapes, and a willingness to adapt to a new digital culture.

The fulcrum for leveraging phygitals is the data tracking their acquisition and use in the physical, web2, and web3 worlds to offer truly personalized and long-lasting campaigns for these users.

In this exploration, we’ve seen how the shift from Web2 to Web3 is not just a technological leap but a fundamental change in how companies interact with customers. The phygital space in Web3 opens up a world of possibilities for innovative customer engagement, but it requires a thoughtful and informed approach to overcome its inherent challenges. By learning from early adopters’ successes and failures, companies can strategically position themselves to maximize their visibility in this new medium.

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Crossing the Phygital frontier

Written by Ian Brillembourg