Yes. Brick-and-mortar retail remains the dominant channel in the United States, accounting for the majority of consumer spending. While e-commerce continues to grow, physical stores still capture roughly 84% of retail sales, driven by grocery, restaurants, services, and experiential retail. Communities that understand how retail formats are evolving can still attract new stores and investment.
Table of contents
- Is physical retail declining?
- Why brick-and-mortar still dominates retail sales
- How e-commerce and physical stores now work together
- The rise of experiential retail
- Why are smaller store formats growing
- What this means for communities recruiting retail
- FAQs
- Sources, assumptions, and methods
Is physical retail declining?
For more than a decade, headlines have predicted the end of physical retail.
Terms like “retail apocalypse” became common during the wave of store closures in the late 2010s.
But the broader data tells a different story.
Retail sales have continued to grow nationally, and many retailers are still opening stores. In fact, much of the change happening in retail today is not about stores disappearing—it’s about stores evolving.
Several major trends are shaping the current retail landscape:
- Store formats are getting smaller
- Consumer trips are becoming more experience-driven
- Retailers are integrating online and physical channels
The result is a retail environment where physical stores remain essential, even as digital channels expand.
Why brick-and-mortar still dominates retail sales
According to the U.S. Census Bureau, e-commerce accounted for approximately 15.8% of total retail sales in Q3 2025.
That means nearly five out of every six retail dollars are still spent in physical locations.
Many retail categories depend heavily on physical stores, including:
- grocery stores
- restaurants and food service
- fitness and wellness
- medical and personal services
- home improvement
Consumers rely on these businesses for convenience, immediacy, and in-person experiences that online shopping cannot fully replicate.
For communities focused on economic development, this means that retail recruitment still matters.
Attracting the right mix of retailers can increase:
- sales tax revenue
- employment opportunities
- foot traffic in commercial districts
How e-commerce and physical stores now work together
Rather than replacing stores, e-commerce has pushed retailers to rethink how stores operate.
Many brands now operate in an omnichannel model, where online and physical shopping complement each other.
Examples include:
- buy online, pick up in store (BOPIS)
- curbside pickup
- ship-to-store fulfillment
- in-store returns for online purchases
These services actually increase the value of physical locations because stores function as:
- distribution points
- customer service hubs
- brand experience centers
For retailers, this integrated approach improves customer convenience while reducing shipping costs.
The rise of experiential retail
Another important trend is the growth of experiential retail.
Experiential businesses focus on creating destinations that encourage visitors to spend time—and money—in a physical space.
Examples include:
- sports and recreation venues
- entertainment concepts
- interactive retail environments
- specialty fitness studios
Restaurants and food halls also play a significant role in experiential retail by creating gathering places for communities.
These types of tenants often anchor mixed-use developments and downtown districts.
Why are smaller store formats growing
One of the most noticeable changes in modern retail is the shift toward smaller store footprints.
Several factors are driving this change.
Rising construction costs
Developers face higher construction costs than in previous decades, which makes large retail projects harder to finance.
Changing consumer behavior
Many shoppers prefer convenient locations near home to large regional destinations.
Operational efficiency
Smaller stores can operate with:
- fewer employees
- lower rent costs
- more targeted inventory
Because of this, retailers are experimenting with smaller prototypes that focus on efficiency and convenience.
Examples include compact grocery stores, neighborhood pharmacies, and smaller quick-service restaurant formats.
What this means for communities recruiting retail
For economic development leaders, the continued importance of physical retail creates a significant opportunity.
Communities that attract new retail typically do three things well.
Prepare development-ready sites
Retailers want locations where the basics are already in place:
- zoning approvals
- infrastructure and utilities
- clear development policies
Understand their trade area
Strong market analysis helps communities demonstrate demand.
This often includes:
- demographic data
- spending patterns
- retail leakage analysis
Retail recruitment frameworks emphasize identifying the community’s trade area and understanding consumer behavior before contacting potential retailers. retail-recruitment-checklist_Re…
Build relationships with the retail industry
Retail expansion decisions are influenced by:
- site selection consultants
- commercial brokers
- developers
Communities that maintain relationships with these professionals are more likely to be considered when retailers expand.
Why secondary markets are attracting attention
Many retailers are increasingly interested in secondary and tertiary markets.
These communities often offer:
- growing populations
- available land or redevelopment opportunities
- lower operating costs
In some cases, retailers find that these markets have strong demand but less competition from existing stores.
This combination can create attractive expansion opportunities.
FAQs
Is e-commerce replacing physical retail?
No. E-commerce is growing, but physical stores still account for the majority of retail sales in the United States.
Why are some large retailers closing stores?
Closures often reflect changing store formats rather than declining demand. Retailers may replace large locations with smaller, more efficient stores.
What types of retail are expanding today?
Growth categories include discount retailers, grocery stores, food and beverage concepts, and experiential businesses.
