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May 13, 2025
Has Physical Retail Endured the Worst of Its ‘E-Commerce Disruption Era,’ or Is More Uncertainty Ahead?
In a recent report written for Retail Dive, senior reporter Daphne Howland made the case for an interesting argument: Retail may be embattled by a number of headwinds — including recessionary fears and a turbulent macroeconomic environment perturbed by tariff concerns and ongoing inflationary pressures — but e-commerce “is no longer the destabilizing force it once was.”
According to a May 12 Colliers Spring Retail Report produced by Anjee Solanki and Nicole Larson, in-store retail sales have declined only once over the course of the past 15 years, and that was in 2020, when the COVID-19 pandemic spurred a host of store closures in the blink of an eye. And as an infographic detailing the respective portion of sales attributed to both e-commerce and in-store sales indicated, in-store sales still represent over three-quarters (76%) of core retail sales, and projections show that figure declining only slightly over the next few years.
“The real retail reality is that while headwinds like tariffs and store closures persist, the disruption from e-commerce appears largely behind us,” Solanki told Retail Dive.
E-Commerce and Brick-and-Mortar Retail May Work in Synergy, Rather Than Opposition
The Colliers report illuminated several key data points in favor of the argument of e-commerce and brick-and-mortar retail synergy, rather than the domination of the latter by the former:
- E-commerce stability: Held steady at 16.4% of all retail sales in Q4 2024 — the same as in Q2 2020, and up from 6.6% in Q4 2014.
- Retail space resilience: U.S. retail space vacancy rate was just 4.2% as of Q1 2025, and shopping center occupancy reached a decade-high peak.
- Omnichannel fulfillment: 30% of online retail sales are supported by physical stores through curbside pickup, in-store pickup, and direct shipping from store inventory.
“Physical stores still account for the vast majority of core retail sales — 76.2% — and the pace of erosion is slowing as online growth stabilizes,” the Colliers study underscored.
By 2030, Colliers expects that omnichannel methods will fulfill more than a third (36.3%) of online orders. On the other side of the equation, physical retail stores will likely shoulder at least some of the responsibility for fielding returns related to online purchases. Data suggests that 77.1% of those polled by Colliers agreed or strongly agreed that they were reluctant to pay return fees for items bought online — a trend that is becoming more commonplace due to a variety of factors.
But it may not be that simple, as Solanki indicated.
“Returns are a key part of the omnichannel experience but handling them in-store requires balancing customer engagement with operational efficiency,” she said. “While in-store returns can drive additional sales and reinforce brand control, they also take up valuable space, potentially limiting revenue per square foot. Outsourcing to third party logistics providers may reduce costs and free up store resources, though it sacrifices direct customer touchpoints.”
Party City, Family Dollar, Big Lots, and Other Major Retail Failings Discussed, and Hope on the Horizon
The Colliers study also reviewed several notable recent retail exits, downsizings, and restructurings — including Party City, Family Dollar, Big Lots, Walgreens, Macy’s, Kohl’s, JOANN, and Forever 21 — while dismissing misconceptions attributing the primary causes of their troubles to the rise in online shopping.
“The core issue has often been a failure to adapt business models or meet evolving customer expectations. Notably, most customer defections have been to retailers with physical stores rather than to online-only competitors,” the authors wrote.
On the other hand, entrants into the U.S. market — global brands such as Aesop, ALDI, Gucci, JD Sports, Mango, Pandora, and Sephora, most prominently — appear poised to break into the stateside retail business in the future. A breakdown of historical store openings since 2018 told the tale: All of the aforementioned brands consistently opened more stores in the U.S. year-over-year, signaling confidence in the U.S. consumer at the physical retail touchpoint.
Report co-author Larson penned the conclusion attached to the Colliers report, keeping her remarks both positive and on target.
“Despite ongoing challenges, physical retail continues to demonstrate its resilience. Stores remain central to the equation — powering digital fulfillment, fostering brand engagement, and anchoring omnichannel strategies. As the market navigates tighter supply, inflationary pressures, and shifting consumer expectations, retailers who embrace flexibility through strategic expansion, pricing agility, or channel integration — will be best positioned to lead. Today’s retail story isn’t about decline but transformation,” she wrote.
Discussion Questions
Will Colliers’ prediction of stability concerning the market shares enjoyed by brick-and-mortar and e-commerce retail segments hold true over the next few years? If not, why not?
Will the much-discussed rise of agentic AI (and generative AI more broadly) act as a wild card in terms of the physical retail business, kicking off another “era of disruption”? Why or why not — and if so, which retailers stand to benefit most?
Poll
Loading …BrainTrust
Anil Patel
Founder & CEO, HotWax Commerce
Cathy Hotka
Principal, Cathy Hotka & Associates
Bob Amster
Principal, Retail Technology Group
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Online is now much more mature. That means two things. First, the potential disruption to other parts of retail, including stores, should be less. Second, most retailers have adjusted and now see online and stores as part of one commercial ecosystem. Frankly, the store versus online argument is a little tired these days.
While there seems to be some stability between in-store and online sales, it would be shortsighted to assume we’ve reached a balance. Consumer habits will continue to change/evolve. Just as online created disruption for in-store retail, there will be something else that causes change.
The vast majority of sales are still conducted in physical stores. Through pandemics, supply chain issues, and now tariffs, the physical store has proven to be remarkably resilient. Retailers need to realize that their store traffic is a gift, and if they focused as much time and attention on converting the store visitors into sales, they would be profoundly better off. In an old article in Harvard Business Review, Jeff Bezos was asked what he saw coming in the next 5-10 years…his answer was surprising. He said, I get asked about the future a lot, but the more interesting question is, what won’t change for the next 5-10 years, because Amazon can create some pretty interesting revenue flywheels around these things – store traffic is one of those things that won’t change. The nature of and intention of the visit has changed, but visiting store to buy stuff won’t.
Not so fast. Ecommerce is anything but settled. We’re about to enter the age of persistent commerce, where customers can buy anything from anywhere at any time.This will require new says of doing things. Just saying.
I agree with your “just saying”.
I don’t think physical stores are going away any time soon, but the poorly-conceived, poorly operated are always going to be cleansed from the retail-scape. No apocalypse here – just the natural order. And yes, a few promising concepts on both sides of the equation will rise fast and flame out early – think CDNow, Drugstore.com, Pets.com on the digital side, and any number of specialty superstore concepts that have run their course (often following interference from private equity investors).
Today, a well-conceived, well-operated retailer understands the cross-ruff between its digital and physical operations and pays sharp attention to the optimal balance required for its merchant niche. Successful web-first retailers have added brick-and-mortar flagship stores to strengthen their foundations – Warby Parker is a good example.
FMCG is and will always be different in this way from apparel, home center, club, luxury, consumer electronics, etc. Each sector has its own natural pace, balance and shopper affinity. A few born-for-the-web brands may choose to stay that way, but frequently-repurchased categories will find physical presence remains essential.
Many established retail chains have developed mature and reliable digital capabilities that effectively expand the walls of their buildings and provide shoppers with service options that are widely expected everywhere. The introduction of AI-enabled shopping agents and other intelligent operating capabilities will continue to push the envelope, to be certain. There will be some victims of this innovation. Shoppers will gravitate, as they always have, to the retailers that best meet their needs.
The impact of automated fulfillment of ecommerce orders is still not fully realized. The pandemic rushed some of these technologies to market and forced other technologies to adapt. Recent efforts in automated fulfillment are toward improving processes to increase efficiency of system operations and accuracy order fulfillment.
Operational improvements and reduced system costs make the economics of automated fulfillment more attractive to retailers struggling with labor costs. And automated fulfillment can deliver a superior service level for customers through accurate order fulfillment.
Categories with undifferentiated products will be more efficiently and more accurately filled online with optimized automated fulfillment systems and supporting processes. Stores will need to offer unique experiences and products.
Can we get serious about measuring retail growth? “… in-store retail sales have declined only once over the past 15 years, and that was in 2020.” Please, how many times has the retail growth rate surpassed the inflation rate?
While e-commerce’s success initially shocked retailers, it is no longer. That doesn’t mean that things will level out. Both behavioral trends and technology favor e-commerce, and these trends will only accelerate over time.
“Today’s retail story isn’t about decline but transformation,” she(Nicole Larson) wrote. This has always been the case. Transform or become irrelevant. In some cases it comes down to things as simple as solid floor merchandising techniques with well curated assortments/story telling with product. Requires training and investment in people, process and technology – which in turn demand consistency and ever improving.
A good number of retailers have learned to complement one channel with the other. Outside of fine tuning the coexistence (read, unified commerce), the disruption is over. I am waiting for the next disruptor. (I do not consider the proliferation of AI a disruptor, but an enabling tool.)
Retail isn’t moving in one direction anymore. Online and physical stores both matter, but brands need to decide how they use each one based on where their customers are and what they need.
Stores do more than sell. They handle pickups, returns, and shape how people experience the brand. But all of this only works when store teams are clear on priorities and operations stay focused.
New tools will keep showing up, including smarter tech, but they won’t change the game on their own. What matters is how they’re used. If they help store teams work better, plan faster, or serve customers more clearly, they’ll make a real difference. Retailers who stay focused on daily challenges and use new tools with clear intent, not just interest, will see the real benefits.
“The Colliers study also reviewed several notable recent retail exits, downsizings, and restructurings — including Party City, Family Dollar, Big Lots, Walgreens, Macy’s, Kohl’s, JOANN, and Forever 21 — while dismissing misconceptions attributing the primary causes of their troubles to the rise in online shopping.”
To be sure! Private equity buyouts, “activist investors,” and unwise merger activities have caused far more harm than online competition and wasted untold capital that could have gone into improving retailers’ performance.
I have to start with my formula. Explore + Experiment + Execution = Experience³. Customers want to Explore + Experiment. The other way of expressing that is Discovery + Shopping. Discovery can be curiosity driven. Shopping can be intent driven. What’s better for Discovery and curiosity than the internet? What’s better for shopping with intent…see, feel, touch, taste, smell, handle, try on…than physical stores? For different brands in different businesses there will be different combinations of physical and ecomm that best serves the customer. Ecomm can’t be about growth at any cost any longer. Market share doesn’t pay for the cost of processing returns.
The e-commerce meteor landed hard and killed off some of the dinosaurs. Surviving species and evolving species and emerging species are now figuring it all out. Amazon does not have the advantage of their own physical stores beyond groceries. But every physical store validates so much of the product customers can now buy on Amazon. Remember when everybody was horrified by “showrooming”…??? Customers could Explore + Experiment to their hearts delight and then buy from Amazon. Isn’t it ALL showrooming these days? Doesn’t the 75% tell us that customers LIKE physical retail? That and the fact that it’s tough to make a profit in ecomm would indicate a long and prosperous life for physical retail.
Where a brand opens a new store, online sales in the vicinity typically increase 15-30%, and where a store closes, online sales drop at least 10%. Thinking brick and mortar and e-commerce are still two separate entities is two decades behind.
A lot of brick-and-mortar retailers have successfully adapted to ecommerce by blending physical and digital experiences – offering curbside pickup, in-store returns, ship-from-store, and in-store tools like SKU-level shopping. While there’s always some uncertainty in retail, this level of integration makes steady evolution seem more likely than another major disruption.
E-Commerce/online retail won’t see significant growth upside against in-store sales going forward, but the big opportunity will be in how consumers adopt it and how retailers use it. Greater emphasis and layers are coming in personalization , sophisticated use of AI, price optimization, and in deeper connections between retailers and their brands.
I remain saddened by how many retailers ignored their strengths (their stores) in order to chase the mythology of web disruption. That myth masked the truth that retailer challenges from 2000 to 2020 resulted from physical world realities — shoppers changing habits because they preferred shopping, for example, for electronics at specialty BestBut or clubs like Costco and SamsClub. So while Amazon challenges retailers (and investors), online hasn’t been their primary challenge. That remains true today with retail sales on average running between 13 and 18% (with certain important exceptions). Retailers need to relax and focus on their stores — and the right web presence for their whole result to thrive.
Agreed – it’s unified commerce at this point. I think the disruption keeps on coming (keeps retail interesting 🙂 – there will be a long tail on tariffs also I recently read about Walmart planning for how to respond to shopping bots vs humans – more on the ecomm side.
We still love stores for immediate access to products, certainty of fit and the personal touch. That said, while e-commerce share may hold steady over the medium term, over the longer term it is poised to grow, as digital natives increase their purchasing power.
Social commerce, livestreaming and agentic AI will enchant younger cohorts and become habitual. If more companies issue return to office mandates, workers will crave the convenience of e-commerce, including e-grocery, to save time by skipping the store.
Today’s retail success depends on effectively combining in-store and online shopping experiences. While physical stores offer valuable human connections and hands-on product testing, online platforms provide wider selection and shopping convenience. But the major challenge for retailers extends beyond finding good staff. They must build advanced IT systems that support true omnichannel shopping.
Customers expect to see accurate inventory information in real time. They want to move smoothly between shopping on different devices and in stores. Top-performing retailers understand that technology and personal service work in tandem. By investing in both areas, stores can create unified shopping experiences that meet customers wherever they’re ready to shop.
It’s never been an either-or question and that’s the fundamental flaw in asking the question of disruption. Consumers are seeking to buy a product. “I want that new look sweater with the cool neck band” not, “I need to buy a sweater through an online channel not an in-store channel” Omnichannel is the format of most relevant purchasing.
The new factor is AI in all its forms, but AI is not a digital phenomenon- it will have just as much value for the retail back-end and engagement. From a purely physical-digital buy today. They’ll have the option to buy any way they want.