"Retailers are reinventing the ways that they connect with their customers in real life," said our analyst Blake Droesch during a recent “Behind the Numbers” episode. "The D2C revolution that we saw play out online has now really reached its limitations, giving way to a disconnection between brands and their customers."

As retailers navigate shifting consumer behavior, an uncertain economic environment, and accelerating AI innovation, two trends emerged as particularly critical.

Physical retail spaces evolve beyond traditional shopping

Despite ecommerce growth, physical stores remain the dominant retail channel, accounting for approximately 80% of all retail sales. However, the function of these spaces is evolving significantly.

Ulta Beauty exemplifies this approach with its multi-layered strategy. The beauty retailer conducts an impressive 20,000 in-store events annually and recently hosted a major ticketed convention-center event in San Antonio that brought together brands, influencers, and customers.

"Beauty is so big among younger consumers and Gen Z in particular who are seeing a lot of content online and are digital natives, but they spend so much time online that they're also driving a lot of store traffic because they want something different," said our analyst Sky Canaves. "They want the real-world experience to supplement their online experience."

The takeaway: As AI becomes more mainstream, the human connection available in physical retail environments becomes increasingly valuable.

• This trend isn't limited to retailers with deep pockets; smaller retailers often excel at creating personal connections with shoppers.
• The store is becoming a community hub that drives loyalty while generating content that feeds back into digital channels, creating a flywheel effect.

AI creates three distinct shopping audiences retailers must address

Retailers can no longer optimize solely for human shoppers; their online presence must also serve AI-assisted consumers and autonomous AI agents alongside traditional audiences.

"As AI shopping assistants and agents become a bigger part of shopping, brands have to rethink how they approach their product content to serve [multiple] distinct audiences at the same time," said Canaves.

This shift is fundamentally changing how retailers approach product content. While human shoppers respond to visual elements, storytelling, and brand consistency, AI assistants require well-structured, in-depth product information that can be contextualized within conversations.

"What appeals to a human consumer might not be the same as what AI shopping assistants or chatbots are looking for," Canaves says. "They're looking for really in-depth product information that's well-structured. They need a lot more content than what typically meets the eye on a product description page."

The takeaway: Retailers must develop multi-layered content strategies that serve both human and AI audiences.

• This includes leveraging user-generated content, which can appeal to both audiences by providing social proof and validation.
• Some retailers may even create dedicated content specifically optimized for large language models (LLMs).

Walmart stands out as an early leader in this space through its partnerships with OpenAI to sell products directly in ChatGPT with instant checkout capabilities and enhance its native shopping assistant, Sparky.

The retail balancing act of 2026

The convergence of these trends creates a complex landscape where retailers must excel both in physical spaces and in optimizing for AI-driven discovery.

"If you don't bolster your store and turn it into a community hub, you will lose," said our analyst Suzy Davidkhanian. Yet simultaneously, "brands have to think ahead to how they show up online and how consumer behavior is adapting rapidly to shift to other channels, and AI is a big one."

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