As we move deeper into 2025, brick-and-mortar stores show their staying power, poised to account for 76.0% of total U.S. retail sales this year. But their continued success isn’t guaranteed. It hinges on a critical pivot from static retail models: embracing emerging AI technologies that support a hybrid, intelligent, and deeply immersive retail experience. 

AI-powered retail is becoming everything

What was once a futuristic experiment is now a foundational layer of modern retail strategy. Rather than viewing AI as a point solution, retailers now see it as an integrated capability to enhance every touchpoint across the customer journey — from supply chain to in-store experience. The numbers tell the story: according to a recent IBM Institute for Business Value study, retail and consumer product executives are significantly increasing AI investments, with spending up over 50 percent. EY Research on AI investments further supports this, noting that a significant majority (97%) of business leaders plan to increase AI spending further in the next fiscal year, with full deployment efforts projected by 2027. This widespread investment is translating into diverse applications across the retail landscape.

AI adoption in retail is happening at multiple levels. Platforms like Shopify’s AI Store Builder democratize the technology, allowing retailers to launch intelligent online storefronts in minutes and generate store layouts based on merchant-selected keywords. At the more sophisticated end, platforms like Wayvee Analytics profile consumers through nonverbal cues and physiological indicators like heart rate and breathing patterns, providing deep insights into consumer shopping behaviors. At the same time, conversational AI enables retailers to engage customers in more natural, personalized ways, setting the stage for the immersive, experience-driven retail environments that resonate most with younger generations.

Creating the Vibe: Why Experience Matters

Experiential retail is the bull’s eye to capturing consumer interest from the younger demographics who gravitate toward experiences combining human connection with technological innovation. The National Retail Federation reports that investments in experiential in-store services create measurable customer loyalty and revenue improvements, with Gen Z’s spending power projected to reach $12 trillion by 2030. Despite being digital natives, they covet experiences over possessions, so retailers focusing on in-store shopping experiences as a gateway to that dollar will likely see 80% higher revenue growth.

Research from an Archrival study in partnership with Vogue Business confirms the trend: 74% of Gen Zs think IRL experiences are more important than digital ones (compared to 66% of millennials). Gen Zs (~75%) favor stores that provide engaging in-store experiences, with beauty and luxury ranking as the highest categories where sensory and personalized experiences converge. Rare Beauty’s marketing strategy leverages the brand’s genuinely curated community engagement, seamlessly transitioning from online to offline and gaining popularity. The US launch of Printemps in NYC blends showroom and arthouse vibes, creating immersive spaces filled with design installations and photo‑ready moments that resonate deeply with Gen Z and younger Gen Alphas.

When Retail Becomes Sensory

As retail shifts from transactional to experiential, it’s not just about the fun and engaging experiences. These younger generations actively seek out sensory environments that counterbalance their digital fatigue and anxiety, so retailers also need to facilitate belonging, calm, and connection through intentional sensory design.

Sensory elements offer the highest return on experience (ROX) when integrated into physical retail environments. According to MG2’s Advisory Wellness Report, a Colliers Engineering & Design company, about 60% of respondents said sounds generated by physical events (like waves or rain) and natural lighting neutralized their anxieties and helped them feel calm. “Brands that can help them unplug and be present by creating community-driven environments–that’s another value proposition,” shares Melissa Gonzalez, Principal and Founder of MG2 Advisory (now part of Colliers Engineering & Design).

The success of experiential retail hinges on designing a complete sensory experience, considering lighting, temperature, acoustics, and layout that optimizes interaction. Integrating technology meaningfully enhances immersion and turns the sensory experience into a story or learning moment. Nearly 50% of consumers seek immersive in-store technology to simulate or test products, while 42% value the ability to customize products through AR/VR, according to MG2 Advisory Research.

As Gonzalez notes, “If immersive tech furthers the experience  — like storytelling or escapism — it can be brilliant. If not, it risks breaking the plane of presence.”