Physical Retail Is Still Doing the Heavy Lifting - But Only If Stores Work Harder
Despite years of predictions about the decline of physical retail, data indicates that stores remain the dominant channel across most markets and categories, even as digital continues to grow faster.
According to global consumer research spanning 20,000+ consumers across 27 countries, physical retail still accounts for the majority of retail spending and continues to play a central role in discovery, engagement, and conversion
Offline still dominates retail spend
While online sales growth continues to outpace physical retail, offline channels are expected to decline only gradually:
Offline retail share is projected to fall from 77% in 2025 to 73% by 2028
Physical stores are estimated to contribute US$14.4 trillion of total US$18.9 trillion in global retail sales in 2025
This suggests that store closures at scale would be premature and potentially value-destructive.
Store closures and openings are happening simultaneously
Retail rationalization is uneven:
An estimated 15,000 store closures are expected in the US in 2025
At the same time, 5,800 new stores are projected to open
The data points to reconfiguration rather than retreat — fewer low-productivity locations, paired with reinvestment in higher-value formats.
Consumers remain store-led at the point of decision
Despite omnichannel behavior:
94% of consumers make final purchase decisions in store, even after browsing across digital channels
Consumers spend over US$40 billion per day in physical retail environments
Stores remain critical not just for transactions, but for decision confirmation.
Discovery and influence happen in physical space
In-store activity continues to drive brand and product discovery:
45% of consumers discover new brands through in-store displays or advertising
24% discover products through in-store demonstrations
27% respond to price promotions and coupons in store
This reinforces the store’s role as a marketing and media channel, not just a sales endpoint.
Retail media and data monetization are growing
Retail media is emerging as a significant revenue stream:
Retail media spending share increased from 17.2% (2021) to 21.7% (2025) of total digital ad spend
Stores enable monetization by linking physical presence with digital targeting, promotions, and brand activations
This positions physical locations as infrastructure for high-margin, non-inventory revenue.
Digital and AI are reshaping how stores perform
Consumers are increasingly comfortable with AI-enabled retail:
60% of consumers already use AI tools during shopping journeys
50% say they like companies using AI in customer interactions
45% report improved shopping experiences as a result
AI is being applied across:
Personalization
In-store navigation
Assisted selling
Inventory optimization
Customer service
Stores are being repurposed into multi-function assets
Retailers are increasingly using stores as:
Click-and-collect hubs
Micro-fulfillment or dark stores
Community and experience centers
Service hubs for repair, rental, resale, health, and wellness
Notably:
72% of consumers try to repair rather than replace items
36% are purchasing more second-hand goods
The global second-hand apparel market is growing at 3× the rate of the overall apparel market
These services increase foot traffic, margins, and customer lifetime value.
Health, sustainability, and services matter — with limits
Consumer priorities are shifting, but constrained by cost pressures:
63% of consumers report trying to make healthier food choices
62% say sustainability is becoming more important
However, 53% report having to deprioritize sustainability due to cost-of-living pressures
This reinforces the need for pragmatic monetization, not idealized positioning.
Key constraints retailers must manage
Data highlights three structural considerations when expanding store functions:
Permission: Does the brand have credibility to offer new services?
Pragmatism: Services scale slower than traditional retail
Partnerships: Many new offerings require external expertise
Retailers that misalign services with brand expectations risk diluting trust rather than creating value.
Bottom line
Physical retail is not disappearing. It is becoming more capital-intensive, more data-driven, and more multifunctional. Stores that remain static will underperform; stores that integrate commerce, media, services, and digital infrastructure will continue to generate returns.
