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How AI is Redefining Physical Stores: Report

Retailers must adapt to three forces reshaping in-person shopping, finds new research by ICSC, McKinsey & Co.

Published

17 minutes ago

April 27, 2026

Retailers need to proactively work to make their physical stores relevant as consumers increasingly use AI to interact with such spaces, a new study concludes. Illustration: IMG visuals characters/iStock by Getty Images

Three major structural forces are reshaping consumer shopping behavior, a new report from ICSC and McKinsey & Co. concludes. In addition to detailing those forces, the study – titled “Shopping in the Age of AI: Redefining Stores for a New Era” – offers what it describes as “actionable insights for retailers and property developers to succeed in the evolving retail landscape.”

The report, based on interviews with retail and real estate leaders and a survey of just over 3000 U.S. consumers, identifies the following as the three major forces reshaping the function of physical retail:

The growing use of AI in the shopping journey.
Consumers’ rising expectations for transparency and convenience.
Shifts in consumer spending power and behaviors.

Together, these shifts are redefining the role of the store—requiring retailers and developers to clearly define each location’s mission and invest decisively to deliver on it, the study states.

“This report presents an opportunity for retailers and property owners: A clear mission for their physical footprint is essential to stand out in a landscape of intelligent technologies and attract consumers to their stores and centers,” said Tom McGee, President and CEO of ICSC, a trade association mainly representing owners and operators of shopping complexes. “As AI transforms the shopping journey and customer expectations remain sky-high, retailers and CRE leaders will need to make disciplined, intentional investments that ensure every store in their portfolio is aligned to a clear strategic purpose – or risk missing out on growing spending power.”

Adds Colleen Baum, Senior Partner at McKinsey & Co., a high-profile management consulting firm: “AI isn’t eliminating the store—it’s raising the bar for what it needs to deliver. As more of the shopping journey moves upstream, the stores that win will be those with a clearly defined role—whether enabling speed and certainty or creating experiences worth the trip.”

For access to the full report, click here.

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