The New Retail Paradox - When Physical Meets Digital

Written by Andrew Teeples — May 15, 2025

Remember when everyone thought physical retail was on its deathbed? Turns out, it's not just alive—it's thriving. But here's the kicker: it's happening in a way no one expected.

Gen Z - The Digital Natives Who Love Shopping IRL

Here's a twist for you. Gen Z, the generation that grew up glued to their phones, actually prefers in-store shopping more than any other age group. Yep, 64% of them prefer the real-world shopping experience. But they're not ditching their digital habits—they're expecting stores to embrace them. Think self-checkouts, interactive displays, and AI-powered fitting rooms. It's not about choosing between online or offline anymore; it's about blending the two seamlessly.

Retail isn't a battle between physical and digital anymore. It's a partnership. And the best retailers? They're the ones nailing this phygital experience.

Consumers Are Getting Smarter About Spending

Let's talk money—because shoppers are making moves. With tariffs and inflation in the mix, people are buying smarter, snapping up deals before prices go up. Case in point? Core retail sales jumped 6.76% in April, partly because of this proactive spending, according to the National Retail Federation.

And it's not just about timing. There's been a big shift toward private labels—sales for these store brands have grown 29% compared to just 15.4% for national brands since 2020, according to Numerator. Why? They're cheaper, and shoppers are getting more value-conscious. The price gap between private and name brands has widened by 38% since 2019. For retailers, it's a wake-up call: consumers want affordability without sacrificing quality. If your business model doesn't align with this, it's time to rethink.

AI - From Cool Gadget to Everyday Essential

Remember when AI was a shiny buzzword? Not anymore. Now, it's powering everything from checkout systems to warehouses. 89% of retailers and CPG brands are now either actively using AI or piloting AI projects, up from 82% a year ago, as reported by NVIDIA.

Take Mashgin, for example—its AI checkout has processed over a billion transactions and grown by 1,233% in just three years, according to GlobeNewswire. Monthly transactions soared from 3 million in March 2022 to 40 million in March 2025.

Even giants like Amazon and Walmart are leaning into AI. Amazon's new warehouse robot, Vulcan, has a sense of touch and can handle 75% of items. Walmart used robotic 3D printing to build a warehouse extension in just one week with a crew of five.

For retailers, this means AI isn't optional—it's essential. And for retail real estate? Store layouts, sizes, and even locations are being reshaped by what AI can do. If you're not keeping up, you're falling behind.

The Human Side of Retail - More Important Than Ever

As tech evolves, let's not forget about the people. Retail workers are struggling—55% report burnout, and nearly 1 in 10 have faced physical attacks from customers. A Motorola Solutions survey found that 57% of American retail workers feel unsafe as they approach peak shopping seasons.

It's not just about security; it's about creating a better work environment. Because here's the thing: interacting with a helpful store employee boosts the likelihood of a purchase by 43%, according to Cegid.

Smart retailers know this. They're not just adding tech—they're investing in their employees too. Happy workers mean happy customers, and that's a win-win.

Retail Real Estate Is Shifting—Fast

The retail real estate world is in flux. Major players like Rite Aid and Walgreens are closing stores, with Walgreens planning to shut approximately 1,200 US locations over three years, as reported by Yahoo News. Meanwhile, others like Walmart are building next-gen "stores of the future" with plans to build or convert 150+ new stores and remodel 650 others, according to Axios.

The numbers tell the story: net absorption went negative for the first time in four years (-2.7 million sq. ft.), but demand for space is still strong, notes CBRE.

What this really means is opportunity. Vacant spaces are being snatched up quickly—nearly a third of shuttered retail sites are leased within five months, according to JLL's retail market report. With overall retail vacancy still near historic lows (~4.8% availability in Q1), the key is staying ahead, knowing which spaces have potential and how to make them work for today's omnichannel shopper.

What's Next for Retail?

Today's shoppers are omnichannel pros. They browse online, buy in-store, or vice versa. And they expect personalization—over 70% of consumers want tailored experiences and get frustrated when they're missing.

For retailers, this means breaking down silos. Apps, mobile wallets, BOPIS (buy online, pick up in-store)—it's all part of the mix. Two in three consumers have downloaded a retailer app (up from last year), and 60% of shoppers anticipate that mobile wallets will replace physical ones by the end of this year.

And for retail real estate professionals? It's time to evaluate spaces based on how well they support these omnichannel operations.

So, What's the Takeaway?

Retail isn't about choosing between physical and digital anymore—it's about combining the best of both. The winners will be the ones who adapt, who see physical spaces not as relics of the past but as essential pieces of a new, tech-driven future.

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