How Retail Brands Drive Digital Innovation Through In-Store Experiences

The numbers support this strategic focus. Over 70% of millennials report that in-store experiences influence where they shop, while 64% of Gen Z actually prefer shopping in stores rather than online. But these younger customers won't tolerate mediocre experiences. Nearly half of Gen Z shoppers say poor in-store experiences would push them to online-only shopping.

Companies that get this right see significant returns. Trusted brands creating compelling store experiences outperform competitors by up to 400%. Customers who trust a brand are 88% more likely to make repeat purchases. Fabletics demonstrates this advantage by using physical locations for market research and product testing, achieving an 85% conversion rate for sizes that previously underperformed online.

Smart retailers understand that success requires more than installing screens and calling it digital. Best Buy has processed 140,000 customer interactions through virtual sales processes alone. Burberry and Nike have built flagship stores that blend retail with social experiences and digital elements. Even Carrefour saw a 20% sales increase after adding voice search to their mobile app.

What separates winning retailers from those struggling to adapt? The best performers focus on specific customer problems and use technology to solve them, rather than adding features for their own sake.

This guide examines how retail brands create competitive advantages through store experiences, looking at the technologies, customer insights, and strategic decisions that determine success in physical retail.

Key Takeaways

Physical retail is experiencing a renaissance driven by digital innovation, with younger generations leading the charge toward experiential shopping that blends technology with human connection.

• Physical retail dominates with 80% of global sales by 2025, while 64% of Gen Z prefer in-store shopping for product discovery despite being digital natives.
• Data-driven personalization creates 400% performance gains for trusted brands, with customers spending 21% more when experiences are tailored to their preferences.
• AR/VR and smart mirrors transform product interaction, allowing virtual try-ons and home visualization that increase purchase confidence by 56%.
• Omnichannel integration drives higher spending, with click-and-collect customers spending 20% more per transaction and 85% adding extra items during pickup.
• Community-centered retail experiences matter most to younger shoppers who view shopping as social activity and expect brands to co-create rather than just market to them.

The future of retail isn't about choosing between digital and physical channels—it's about creating seamless experiences where technology enhances rather than replaces human connections, turning stores into destinations that inform, engage, and inspire customer loyalty.

The shift from transactional to experiential retail

Physical retail dominates despite years of predictions about its decline. Forrester forecasts physical retail will represent almost 80% of global retail sales in 2025. North America shows even stronger brick-and-mortar performance, with physical locations accounting for 83.8% of retail sales by the fourth quarter of 2024. These aren't just survival numbers—they reveal where customers actually want to shop when given quality options.

The question isn't whether physical retail will survive. It's which retailers will adapt their stores to meet changing customer expectations.

Why in-store experience matters today

Years ago, retailers worried that digital natives would abandon physical stores entirely. The opposite happened. A recent ICSC survey found 97% of Gen Z respondents shop at brick-and-mortar stores. This generation controls over USD 100 billion in global spending power, making their preferences impossible to ignore.

What draws customers back to physical locations? The answer goes beyond simple product purchases:

• Sensory engagement: Customers can touch, try, and experience products before buying—something digital cannot replicate
• Social interaction: Shopping becomes a communal activity and opportunity to connect with friends
• Immediate gratification: Customers leave with products in hand rather than waiting for delivery
• Emotional connection: Memorable store experiences build brand loyalty and drive repeat purchases

Most telling is this statistic: 60% of Gen Z consumers expect retail spaces to be fun and experiential, not just functional. Retailers who understand this can drive deeper brand connections and higher customer lifetime value.

How digital complements physical retail

Smart retailers don't view digital and physical as competing channels. They use technology to solve specific problems customers face in stores.

Amazon Go stores demonstrate this approach through computer vision, smart shopping carts, and deep learning that eliminate checkout lines. Nike's House of Innovation stores integrate mobile apps with "scan to learn" features and Nike Member Pass to personalize each visit.

The goal isn't to add technology for its own sake. Digital tools bridge the gap between online convenience and in-store sensory value. This transforms static retail spaces into dynamic, data-rich environments that actually help customers find what they need.

Examples of immersive store experiences

Some retailers have moved beyond incremental improvements to completely reimagine what stores can be. Jordan's Furniture captures this with their tagline: "Not just a store, an experience!" Their locations feature ropes courses, 3D theaters, and seasonal events like holiday enchanted villages.

Luxury retailers embrace "retailtainment"—experiences that engage customers beyond simple transactions. Farfetch's London store uses connected racks, touch-enabled mirrors, and digital check-ins for personalized experiences. Burberry's Shenzhen flagship includes avatar creation, personalized music, and interactive displays where visitors earn "social currency" for exclusive items.

Rebecca Minkoff stores take a different approach with interactive fitting room mirrors that let customers request different sizes, adjust lighting, and receive product recommendations. These personalized touches don't just improve the shopping experience—they increase both sales and customer loyalty.

The pattern is clear: successful retailers focus on solving real customer problems rather than showing off new technology.

What Younger Customers Actually Want From Stores

Retailers spent years preparing for the death of physical retail. The assumption seemed logical: digital natives would naturally gravitate toward digital shopping. What happened instead caught many brands off guard.

Younger shoppers didn't abandon stores. They started demanding that stores work differently.

Gen Z chooses physical over digital for discovery

The data reveals a pattern most executives didn't expect. Gen Z consumers prefer in-store shopping when discovering new products—at 64%, they actually surpass Millennials (43%) and even Gen X (62%). Their combined in-store purchases for mass merchandise and grocery account for nearly 50% of total spending.

What drives this preference becomes clear when you look at their motivations. After years of screen saturation, many young shoppers experience digital fatigue and crave experiences that online shopping simply can't provide. The numbers support this: 58% visit stores because shopping represents social time with friends and family, and the same percentage want to touch and try products before buying.

Most telling is this statistic: 76% of Gen Z shoppers agree that "physical stores provide a more well-rounded and enjoyable shopping experience than online shopping". They back this up with behavior—visiting malls an average of 8.6 times in three months.

For retailers, this creates both opportunity and pressure. Gen Z customers will choose physical stores, but only if those stores deliver experiences that justify the trip.

Millennials push personalization expectations higher

Millennials approach shopping differently than Gen Z, but their impact on retail innovation runs just as deep. Nearly 90% want personalized offers from merchants—the highest rate among all age groups. For 45%, personalized experiences aren't nice-to-have features; they're essential.

These preferences translate into switching behavior. Forty-one percent of millennials would consider changing retailers for better personalization—compared to 34% of Gen Z and just 26% of Gen X. When brands deliver effective personalization, millennials spend 21% more.

The gap between retailer confidence and customer satisfaction tells an important story. While 46% of brands believe they excel at personalization, only 15% of consumers agree. This disconnect represents a significant opportunity for retailers willing to invest in data-driven personalization strategies.

Community becomes the new competitive advantage

Both generations share one expectation that's reshaping retail strategy: they want shopping to feel like community participation, not just product acquisition.

Gen Z shoppers don't distinguish between online and offline relationships—friends are friends, regardless of where they met. This mindset is changing how retailers think about store design and customer engagement.

Industry observers predict that "community-driven retail, especially in live and peer-to-peer environments, will continue to dominate because shoppers increasingly want connection, trust, and authenticity baked into their buying experience".

Smart retailers recognize that younger customers influence older ones, even when they're not the primary target audience. The strategic shift happening now: brands must evolve from marketing to younger generations to actually co-creating with them. These customers "assume their voice matters, their identity should be reflected, and their digital experiences should be intuitive and frictionless".

The retailers succeeding with younger customers understand that technology serves community building, not the other way around.

What Technologies Actually Improve Store Performance

Retail executives are increasing technology budgets significantly—34% more for generative AI, 33% for artificial intelligence, and 31% for business intelligence/data analytics. These investments reflect a shift from experimenting with technology to deploying solutions that measurably improve customer experiences and store operations.

AR and VR solve the confidence problem

The biggest challenge in retail isn't getting customers to stores—it's helping them make purchase decisions once they arrive. Augmented reality and virtual reality address this directly by letting customers interact with products before buying. Shoppers can visualize furniture in their homes, try on clothing virtually, or see how makeup looks on their faces.

The results speak to the technology's effectiveness. AR increases purchase confidence for 56% of consumers, and 61% prefer retailers that offer AR experiences. This confidence translates to sales.

IKEA's Place app demonstrates the practical application. The AR-powered design consultations help customers visualize furniture in their actual spaces, reducing returns and increasing satisfaction. Warby Parker's virtual try-on feature and ASOS's body-type visualization serve similar functions. Even basic AR navigation tools that guide customers to products improve the overall shopping experience.

Smart mirrors create personalized moments

Smart mirrors function as regular mirrors but add cameras, sensors, and augmented reality to create interactive experiences. Retailers like H&M, Wella, and Topshop use these mirrors to let customers try products virtually and receive personalized recommendations.

The market growth reflects retailer interest and customer adoption. Smart mirror investments grew from $2.82 billion in 2022 to $3.28 billion in 2023, with projections reaching $5.58 billion within four years. More importantly, 34% of connected device owners express strong interest in using in-store smart mirrors.

Autonomous checkout removes friction points

Amazon's Just Walk Out technology eliminates traditional checkout lines through AI, sensors, computer vision, and RFID. The system tracks items as shoppers select them, maintains virtual carts, and processes payments automatically when customers leave.

Smart carts offer a middle ground between traditional checkout and fully autonomous systems. These AI-powered carts scan items automatically, display running totals, and can process payments directly. The appeal is clear—43% of consumers worldwide express excitement about technologies that create seamless shopping experiences.

Interactive kiosks extend store capabilities

Interactive kiosks and digital signage create information hubs that extend what stores can offer customers. These self-service solutions streamline processes, deliver targeted promotions, and generate valuable data on customer behavior.

Fashion retailers use digital kiosks as virtual dressing rooms where customers can "try on" clothes without changing. This approach addresses practical concerns about time and privacy while expanding the range of products customers can consider.

The pattern across these technologies is consistent: they solve specific customer problems rather than adding complexity. The most successful implementations focus on removing friction, increasing confidence, or extending store capabilities in ways that directly impact purchase decisions.

Why Data Matters More Than the Technology Itself

Flashy technology grabs attention, but data determines whether store investments actually improve business results. The difference between successful retailers and those struggling with digital initiatives comes down to how they collect and use customer information to solve real problems.

Retailers who understand this difference create personalized shopping journeys that connect with customers in ways that generic experiences cannot match.

What In-Store Data Actually Reveals About Customers

Smart retailers track customer behavior through sensors placed throughout their stores, creating real-time maps of where people spend the most time. These insights show which areas draw crowds and which displays get ignored, helping retailers place products and staff where they'll have the biggest impact.

RFID tags, beacons, and store cameras monitor how customers move through spaces, revealing patterns that inform layout decisions. Even security footage serves a dual purpose, capturing behavioral insights that might otherwise go unnoticed. The most valuable data goes beyond basic demographics to include browsing patterns, purchase history, and specific in-store interactions.

This information helps retailers answer critical questions: Which products do customers examine but not buy? Where do shopping trips end early? What paths lead to the highest-value purchases?

Turning Insights Into Personalized Experiences

Raw data becomes valuable when retailers use it to personalize what customers see and experience. When retailers analyze which aisles customers visit and which displays capture attention, they can tailor in-store ads and product recommendations with remarkable precision.

The impact is measurable. Seventy-eight percent of consumers want tangible, money-saving benefits from personalized experiences. Retailers with mature personalization capabilities see improvements in engagement, satisfaction, order value, and customer lifetime value.

But most retailers overestimate their personalization effectiveness. While 46% of brands believe they excel at personalizing customer interactions, only 15% of customers agree. This gap represents a significant opportunity for retailers who can bridge the difference between what they think they're delivering and what customers actually experience.

How Leading Retailers Use Data to Redesign Stores

Dollar General focuses on first-party data to create tailored experiences that increase customer value. Their approach centers on quality data that provides contextual understanding of their rural customer base. This data infrastructure allows them to sharpen marketing efforts and deliver real-time personalization that resonates with their specific audience.

Home Depot built their strategy around "Know me, Meet me, Speak to me, Value me," combining first-party, third-party, and zero-party data with data science to customize experiences based on individual customer needs and projects.

Macy's takes a different approach, implementing omnichannel personalization that combines customer data with real-time behavioral insights. This ensures content aligns with each customer's preferences whether they're browsing online, visiting stores, or switching between channels.

What these retailers understand is that data collection alone doesn't create competitive advantage. The value comes from translating insights into specific improvements that customers notice and appreciate.

Creating Connected Customer Journeys Across Channels

Most customers don't shop in single channels anymore. Over 50% of shoppers engage with three to five different touchpoints before completing a purchase. The retailers who succeed understand that each interaction shapes the overall experience, and disconnected channels create friction that drives customers to competitors.

Click-and-collect drives higher spending

Buy online, pick up in store (BOPIS) solves multiple problems at once. Customers get online convenience without shipping delays, while retailers reduce delivery costs and create additional store visits. The results speak for themselves: BOPIS customers spend 20% more per transaction, with 85% adding extra items during pickup.

What makes this model work? The key insight is that customers arriving for pickup are already committed buyers. They've invested time in the purchase decision and made the trip to your store. This creates an opportunity for additional sales that pure e-commerce can't match.

Endless aisle prevents lost sales

Endless aisle technology addresses one of retail's most expensive problems: out-of-stock situations. When customers can't find what they want in-store, 37% will visit a competitor instead. Endless aisle lets shoppers access your full inventory through digital devices, keeping sales that would otherwise walk away.

The technology works because it captures customer intent at the moment of decision. Instead of losing a sale to stockouts, you convert it through your broader inventory network.

Mobile loyalty programs bridge channels

Mobile devices connect physical and digital shopping in ways that desktop experiences never could. Over half of loyalty program members prefer mobile interactions. Smart retailers use these programs to create consistency between online research and in-store purchases.

The strongest programs don't just track purchases—they help customers move seamlessly between channels. Points earned online can be redeemed in-store. Product research on mobile apps connects to in-store availability. Customer service interactions are visible across all touchpoints.

Testing reveals friction points between channels

The biggest opportunities often hide in channel transitions—the moments when customers move from online to offline or vice versa. Effective testing focuses on these handoff points rather than optimizing individual channels in isolation. You need to track customer behavior across the entire journey, not just within single platforms.

This approach reveals problems that channel-specific metrics miss. A customer might research products online, visit your store, then complete the purchase on their phone while still in the store. Understanding this complete journey helps you remove friction and improve conversion rates at each step.

Conclusion

Physical retail isn't disappearing—it's adapting to compete in ways that online channels cannot match. The retailers succeeding today focus on specific customer problems rather than chasing every new technology. They understand that the best store experiences solve real friction points instead of adding features for their own sake.

The shift isn't really about digital versus physical anymore. What matters is whether you can create experiences that customers value enough to choose your store over alternatives. This requires understanding which technologies actually improve customer journeys and which ones just create complexity.

Years of predictions about store closures missed something important about younger shoppers. They want physical experiences, but they expect those experiences to work better than what previous generations accepted. The retailers winning with these customers combine the convenience of digital tools with the social and sensory advantages that only physical spaces can provide.

The technology landscape will keep changing. New tools will emerge, and current solutions will evolve. But the fundamental challenge remains the same: can you create experiences that customers find valuable enough to seek out? The answer depends more on understanding customer needs than on implementing the latest innovations.

What I've noticed is that successful retailers treat technology as a solution to customer problems, not as the goal itself. They start with friction points in the customer journey and then find tools that eliminate those barriers. This approach leads to simpler, more effective implementations than starting with technology and trying to find uses for it.

The retailers that will succeed focus on three things: understanding what customers actually want from physical stores, removing obstacles that prevent good experiences, and using data to improve those experiences over time. The specific technologies matter less than getting these fundamentals right.