AI in retail: How artificial intelligence is reshaping physical stores

30 June 2026

Anna Schabikowska

Artificial intelligence is revolutionizing the retail sector, yet it is not causing online channels to displace physical stores. According to the Savills report, “AI and the future of physical retail,” the role of AI is centered on ensuring higher productivity, improved margins, and operational efficiency. Physical stores are evolving; they are becoming fulfillment hubs and centers for building customer relationships, which allows retailers to compete more effectively in a demanding market.

Key insights:

38% of consumers in France, Germany, and the UK already use AI to inform their shopping choices, but so far, this has not translated into a significant change in channel choice.
The share of European retail sales conducted online grew only from 13.4% to 14.1% over two years, indicating that AI is currently influencing product choice more than driving customers to switch from offline to online channels.
The greatest benefits from AI implementation in physical retail today are visible in operational productivity, conversion, return reduction, and better inventory management.
It is projected that by 2030, agentic commerce will increase the share of online sales in Europe to nearly 17.9%. This growth will not come at the expense of physical locations, but as part of a more integrated and mature omnichannel ecosystem.

– AI doesn’t diminish the fundamentals of retail management, but it is changing the way retailers use information and make optimal decisions – says Dariusz Stolarczyk, Strategic Advisor at Exorigo-Upos – AI improves operational efficiency, limits losses, and strengthens the omnichannel model, providing entrepreneurs with significant benefits.

AI in physical retail: Revolution or evolution?

In the era of AI, physical stores are not losing their relevance; rather, they are becoming a key element of a modern, fully integrated sales infrastructure. The introduction of AI-based solutions in European retail has not caused a visible shift of demand from physical to digital channels.

Instead, AI is introducing subtle but key business changes: it noticeably improves conversion, ensures higher product availability, effectively reduces losses, and streamlines daily operations.

The Savills report “AI and the future of physical retail” makes it clear: AI currently influences how a customer chooses a product more than where they buy it. Consumers use algorithms to make decisions, but the purchase itself is completed within an omnichannel model: via an app, click-and-collect, or directly in-store.

In which areas does AI bring the greatest benefits?

The most significant impact of AI-based solutions is visible in operational optimization and sales support. A prime example is the footwear retailer FLO, which, through the implementation of AI in allocation and replenishment, cut lost sales by 12% and increased revenue by 5% without increasing inventory levels. This proves that technologies and AI can improve product availability without generating costly surpluses.

Further areas where AI brings measurable results include increasing conversion and minimizing returns:

Increasing conversion: Traditional e-commerce converts just over 3% of visits. Conversational commerce using AI can achieve results exceeding 12%, effectively guiding the customer to finalize the purchase during moments of hesitation.
Optimizing returns: Abandoned baskets are a massive challenge—in 2025 alone, UK retailers lost as much as £34.4 billion due to them. AI helps solve this, for example, the implementation of virtual fitting rooms by Zalando allowed for a 40% reduction in jeans returns across 14 markets.

For the retail sector, this is crucial information. Lower return rates and more precise inventory management mean higher profitability and a significant reduction in operational pressure in daily store operations.

Does AI threaten the future of physical stores?

On the contrary – everything points to AI strengthening their position in the sales ecosystem. The modern physical store has undergone a significant evolution: it has ceased to be merely a place of transaction and has become a key point for building brand experience, handling returns, and serving as a fulfillment node.

Physical retail can look to the future with much more confidence than a decade ago. Although retail space in shopping centers and retail parks has been growing at a rate of only 1.2% per year since 2020, stores have become better adapted to the sales ecosystem, which reduces tension between online and offline channels.

Agentic commerce – The future challenge

Agentic commerce is a breakthrough retail model in which advanced AI systems not only advise but also independently search for and finalize purchases on the customer’s behalf. According to PwC estimates, by 2030, this solution could account for 8–15% of online retail revenue in Europe.

In such a scenario, the share of e-commerce in European retail will grow to 17.9%, which is 3.8 percentage points higher compared to 2025. This means the potential to generate up to 97 billion euros in additional online revenue directly attributable to AI.

However, it is worth remembering that the popularization of this model will occur gradually. Consumers approach it with reservation – as many as 84% of those surveyed feel uncomfortable when an AI system finalizes a transaction without their direct approval. Therefore, in the coming years, agentic commerce will prove itself primarily as an innovative tool supporting the purchasing process, rather than as a substitute for traditional shopping behaviors.

What will the future of physical retail look like?

In the coming years, success in physical retail will be achieved by retailers who can fully utilize its greatest advantages:

immediate product availability,
personal contact with the brand,
and the ability to build strong relationships with consumers.

The stores in the best locations will perform best – perfectly connected, digitally optimized, and fully integrated with the omnichannel model. AI will primarily serve as a tool for improving profitability. Faced with growing competition and cost pressure, modern retailers today benefit much more from precise demand monetization and intelligent resource optimization than from merely increasing sales volume.

Summary

Artificial intelligence in physical retail influences productivity growth, conversion improvement, and the optimization of existing infrastructure, rather than a forced migration of customers to digital channels.

Physical stores are undergoing a profound transformation – they are no longer just transaction points but have become hybrid centers of brand experience and logistics nodes. Thanks to AI support, they can manage click & collect processes and local distribution more efficiently, significantly accelerating customer service.

The future of retail lies in the masterful combination of technology, operations, and customer experience.

FAQ

Will AI cause physical stores to cease to exist?

No. AI supports physical locations by increasing their operational efficiency. Physical stores are becoming experience centers that e-commerce cannot fully replace.

Is implementing AI in retail expensive?

Although implementation requires initial investment, thanks to the optimization of operational processes, cost reduction, and sales increases, these solutions quickly become a source of real savings. In an era of growing competition, automation in retail is not a cost, but a strategic investment in long-term market advantage.

What is agentic commerce?

It is a forward-looking sales model in which advanced AI systems independently search for, compare, and finalize purchases on behalf of the customer. Although it is gaining importance, most consumers still prefer personal control over the transaction process.