This article was published in 2026 and references a historical event from 2017, included here for context and accuracy.
- Tension: Digital retailers built empires by eliminating physical presence, yet now they’re investing billions in the very stores they promised would become obsolete.
- Noise: Industry narratives insist we must choose between online convenience and in-store experience, obscuring how these channels actually amplify each other.
- Direct Message: Physical stores don’t compete with digital channels but rather create a multiplier effect that drives profitability across the entire retail ecosystem.
To learn more about our editorial approach, explore The Direct Message methodology.
When Amazon announced plans in 2017 to open its first New York City bookstore in Manhattan’s Time Warner Center, industry observers treated it as an isolated experiment.
Today, that moment marks the beginning of a fundamental shift in retail strategy.
By 2025, Amazon operated over 642 physical locations globally, spanning grocery stores, convenience shops, and experiential retail formats.
The pattern extends far beyond Amazon. Warby Parker, Bonobos, Glossier, and hundreds of other digital-native brands have moved decisively into physical retail.
This isn’t nostalgia or hedging bets. It represents recognition of a psychological and economic reality that took nearly a decade to fully understand.
The promise that couldn’t deliver
The narrative was seductive in its simplicity: online retail would eliminate the inefficiencies of physical stores. No rent, no staff, no inventory sitting on shelves. Just pure digital efficiency connecting products directly to consumers.
For years, every quarterly earnings report seemed to validate this vision. E-commerce grew relentlessly, claiming larger portions of retail spending each year.
Yet beneath the growth statistics, digital retailers confronted an uncomfortable truth. Customer acquisition costs kept climbing while brand loyalty remained frustratingly shallow.
Online shoppers compared prices across sites in seconds, treating retailers as interchangeable fulfillment mechanisms rather than destinations worth returning to.
Traditional retailers, meanwhile, adapted faster than the predictions suggested. By 2014, brick-and-mortar chains had deployed “buy online, pickup in store” services that married digital convenience with physical immediacy.
These services proved remarkably effective at driving additional purchases, with customers frequently buying items they hadn’t planned to acquire when they arrived for pickup.
Physical presence wasn’t the liability the industry had assumed. It was an asset that online-only retailers couldn’t replicate through algorithms or logistics networks.
When data confronts assumptions
The turning point came when researchers began measuring what they called the “halo effect.”
Opening a physical store didn’t just generate in-store revenue. It increased online sales in surrounding areas by an average of 6.9%.
For emerging digital brands, that boost reached 13.9%.
The mechanism wasn’t mysterious. Proximity creates trust in ways that targeted advertising cannot manufacture.
A physical store serves as tangible proof that a brand exists beyond pixels and packaging. Shoppers who could touch products, return items in person, or simply see a branded storefront developed different relationships with retailers than those who interacted exclusively through screens.
Even more revealing: when retailers closed physical locations, online traffic declined by 11.5% in those markets. The relationship flowed both directions. Physical stores drove digital engagement, while digital channels brought customers into stores.
Retailers with both saw established brands experience a 6.8% increase in average online order size after opening physical locations.
The data demolished the false choice between channels. Consumers never wanted pure digital or pure physical retail. They wanted flexibility to move seamlessly between both based on what each purchase required.
Physical stores don’t diminish digital commerce. They create the conditions for digital commerce to generate deeper customer relationships and higher lifetime value.
This insight explains why Amazon invested billions in physical retail even as its e-commerce business continued growing. The company wasn’t abandoning its digital foundation. It was building infrastructure to make that foundation more valuable.
Physical stores became fulfillment hubs, showrooms, and brand anchors that transformed how customers engaged with Amazon’s entire ecosystem.
The same pattern repeated across digital-native brands. M.Gemi discovered that cross-channel customers spent 60% more than single-channel shoppers. Warby Parker found that physical stores generated over half its revenue within a few years of opening its first location.
These weren’t failures of digital strategy. They were recognition that digital strategy requires physical components to reach its full potential.
What the shift reveals about consumer behavior
The movement toward physical retail exposes fundamental aspects of human psychology that e-commerce proponents underestimated.
Shopping isn’t purely transactional. It involves uncertainty, social dynamics, and the need for tangible validation that screens struggle to provide.
Despite growing up as digital natives, Gen Z shops in physical stores at rates similar to Baby Boomers. The difference isn’t technological comfort but rather what each channel delivers.
Physical stores offer immediate gratification, sensory experience, and social connection that no delivery window can replicate. Digital channels provide research capability, price comparison, and convenience for routine purchases.
By 2025, 80.8% of retail sales still occurred in physical stores, even as e-commerce continued steady growth.
The online share increased from 15.1% to 16.2% between 2024 and early 2025, representing meaningful growth in absolute terms while confirming that physical retail maintains dominant market share.
More importantly, the boundary between channels has dissolved. Shoppers research online then buy in store. They browse physically then order digitally. They use mobile devices to compare prices while standing in aisles.
The question isn’t whether customers prefer online or offline shopping. It’s whether retailers can serve customers fluidly across whichever touchpoints each purchase requires.
This demands operational sophistication that many retailers still lack. Inventory systems must provide real-time visibility across all locations. Staff need training to assist customers regardless of where purchases originate. Return policies must work seamlessly whether items were bought online or in store.
Technology becomes the invisible infrastructure enabling human experiences rather than the replacement for those experiences.
Integrating this experience with technological and customer satisfaction strategies is what separates successful traditional retailers from the rest.
The winners understand that omnichannel execution isn’t about having multiple sales channels. It’s about creating a unified experience where customers feel recognized and served consistently whether they’re browsing on mobile devices, speaking with store associates, or picking up online orders.
Data flows between systems in real time. Preferences follow customers across touchpoints. Problems get resolved through whichever channel proves most convenient.
The retailers succeeding in 2026 aren’t those with the best e-commerce platforms or the most impressive physical stores.
They’re the ones who’ve eliminated friction in moving between channels, making each strengthen the value of the other rather than compete for customer attention and budget.
