Table of Contents
- Key Highlights
- Introduction
- The Enduring Appeal of Physical Retail
- The Shift in Consumer Behavior
- The Importance of In-Store Experiences
- Innovations in Retail: The Rise of Experiential Spaces
- The Integration of Services in Retail Stores
- The Role of Technology in Enhancing In-Store Experiences
- Rethinking Store Layout and Design
- The Future of Physical Retail
- FAQ
Key Highlights
- Despite the rise of e-commerce and AI tools, physical retail remains the dominant shopping channel, accounting for 77% of retail spend in 2025.
- Fresh food, snacks, and beverages are the leading categories driving in-store purchases, highlighting the importance of physical locations for product discovery.
- Retailers are innovating by transforming stores into experiential spaces, incorporating services like rentals and repairs to enhance customer engagement and loyalty.
Introduction
The retail landscape is undergoing a seismic shift as digital shopping and artificial intelligence (AI) tools gain traction among consumers. Yet, physical stores continue to hold a significant place in the hearts of shoppers. Research from EY reveals that despite the growing percentage of online sales, in-person shopping remains the preferred channel for many consumers. As the industry evolves, retailers face the challenge of reimagining their physical spaces to meet changing consumer expectations. This article delves into the current state of retail, the influence of AI on shopping behavior, and the innovative strategies retailers are adopting to enhance the in-store experience.
The Enduring Appeal of Physical Retail
According to EY's latest research, physical stores will continue to dominate retail spending, comprising 77% of total sales in 2025. However, projections indicate a gradual decline to 73% by 2028, as consumers increasingly turn to online shopping. Despite this shift, Jon Copestake, EY's global consumer senior analyst, emphasizes that brick-and-mortar stores remain vital for many shopping categories.
The allure of physical retail lies in the tactile experience it offers. Consumers can touch, feel, and interact with products, which fosters a sense of connection and satisfaction that online shopping often lacks. In particular, categories such as fresh food, snacks, and beverages see high in-store traffic, as consumers prefer to select these products personally.
The Shift in Consumer Behavior
The rise of AI tools in retail is reshaping how consumers interact with brands. The EY AI Sentiment Index indicates that three in five consumers already utilize AI for shopping assistance. However, trust remains a significant barrier; while consumers may use AI to explore options, a small fraction is willing to let AI make final purchasing decisions. This highlights a critical insight: while technology enhances the shopping journey, the final act of purchasing still heavily relies on in-person experiences.
The omnichannel shopping behavior is evident, with 94% of consumers making purchasing decisions only after browsing across various channels. This statistic underscores the importance of physical stores as critical touchpoints in the consumer journey. Retailers must adapt by creating environments that facilitate product discovery and engagement, ultimately guiding consumers toward purchase.
The Importance of In-Store Experiences
As AI-driven e-commerce continues to expand, the role of physical stores must evolve. Copestake argues that stores serve as invaluable assets for product discovery, allowing consumers to explore promotions, learn about new product launches, and receive personalized advice—elements that online platforms often overlook. The physical store experience provides a unique opportunity for retailers to engage customers in ways that AI cannot replicate.
To capitalize on this, retailers are reimagining their store formats. Innovative concepts like experiential retail are being introduced, transforming stores into destinations rather than mere shopping locations. This strategy not only attracts customers but also encourages them to spend more time within the store, ultimately leading to higher sales.
Innovations in Retail: The Rise of Experiential Spaces
Retailers are increasingly adopting innovative formats that prioritize customer engagement and interaction. Dick’s Sporting Goods is a prime example of this trend with its House of Sport model, which incorporates climbing walls, simulated driving ranges, and immersive experiences. These features not only enhance the shopping experience but also create a sense of community, encouraging customers to return.
Such experiential spaces serve a dual purpose: they diversify revenue streams while simultaneously fostering customer loyalty. By providing unique in-store experiences, retailers can differentiate themselves from online competitors and create lasting impressions on consumers.
The Integration of Services in Retail Stores
Adding services to the retail mix is another strategy gaining traction among retailers. As consumers seek more than just products, services such as rentals, repairs, and personalized consultations can significantly enhance the value proposition of physical stores. By addressing the needs of modern consumers, retailers can create a comprehensive shopping experience that extends beyond mere transactions.
For instance, in the apparel sector, retailers are increasingly offering rental services for high-end clothing and accessories. This not only caters to the growing demand for sustainability but also provides consumers with access to premium products without the burden of ownership.
The Role of Technology in Enhancing In-Store Experiences
While physical stores remain integral to retail, technology plays a crucial role in enhancing the in-store experience. Retailers are leveraging tools like augmented reality (AR) and virtual reality (VR) to create immersive shopping environments. These technologies allow consumers to visualize products in real-world settings, enhancing their shopping journey.
For example, beauty retailers are using AR to provide customers with virtual try-ons, allowing them to experiment with different products and looks without the need for physical samples. This blend of technology and in-person shopping creates a seamless experience that caters to the preferences of today’s consumers.
Rethinking Store Layout and Design
The design and layout of retail spaces are also undergoing transformation to meet evolving consumer needs. Open layouts that encourage exploration and interaction are becoming more common, as retailers aim to create inviting atmospheres that encourage customers to linger. Incorporating elements like comfortable seating areas, interactive displays, and community spaces can enhance the overall shopping experience.
Moreover, strategically placing high-demand products at the front of the store can draw customers in, while creating visually appealing displays can capture their attention and encourage impulse purchases. Retailers must consider how every aspect of their store design contributes to the overall consumer experience.
The Future of Physical Retail
As we look to the future, the relationship between physical retail and technology will only deepen. Retailers that successfully integrate innovative experiences, technology, and services into their physical spaces will be well-positioned to thrive in an increasingly digital world. While online shopping continues to grow, the importance of in-person interactions and experiences cannot be overstated.
Retailers must remain agile, adapting to changing consumer preferences while leveraging technology to enhance their offerings. By embracing this multifaceted approach, the physical retail sector can continue to thrive, offering consumers the best of both worlds—convenience and a rich, engaging shopping experience.
FAQ
1. Why is physical retail still important despite the rise of e-commerce? Physical retail remains essential because it offers a tactile shopping experience that online platforms cannot replicate. Many consumers still prefer to see and interact with products in-person, making physical stores crucial for product discovery and engagement.
2. How are retailers adapting to changing consumer behaviors? Retailers are reimagining their physical spaces by creating experiential environments that prioritize customer engagement. This includes incorporating services, interactive displays, and innovative layouts that encourage exploration and interaction.
3. What role does technology play in enhancing the shopping experience? Technology, such as AI, AR, and VR, is being integrated into physical retail to enhance the customer journey. These tools enable retailers to provide personalized experiences, allowing consumers to visualize and interact with products in new ways.
4. How can retailers create customer loyalty in physical stores? By offering unique in-store experiences, personalized services, and community engagement opportunities, retailers can foster customer loyalty. The focus should be on creating memorable experiences that encourage shoppers to return.
5. What are some examples of innovative retail formats? Dick’s Sporting Goods’ House of Sport is a notable example, featuring immersive experiences like climbing walls and simulated driving ranges. Such formats transform stores into destinations, enhancing customer engagement and encouraging longer visits.
