I spend a lot of time with both technology investors and global retail brand leaders. There is a fascinating gulf between how venture capitalists think about retail — and how brand operators actually live it. For VCs, the instinct is straightforward: software continues to eat the world, e-comm is still the future. For retailers, though? E-commerce has flatlined, margins are squeezed, and the future is in brick-and-mortar evolution and expansion.

 
E-Commerce Growth Is Slowing — In Many Retailers’ Views, It Has Peaked

Let’s start with the hard data. According to the Census Bureau: e-commerce made up about 16.3% of total U.S. retail in Q2 2025 — a far cry from the crushing dominance many assume. Furthermore, the torrid growth of the early 2000s has slowed. In Q2 2025, U.S. e-commerce sales grew 5.3% year-over-year — the slowest such growth since Q4 2022, and in-line with the slowing that has been taking place outside of the pandemic years.

Wishful E-Comm Thinking Is Missing The Real Story

And yet, many investors naturally want to believe there is still road to run in e-comm. The logic, is, well, logical: no physical footprint means lower fixed costs, faster scaling, “better defensibility” through software or logistics. What’s missed is that many retailers are no longer looking to expand their online business — they’re trying to compress its cost, wrestle with fulfillment, returns, customer acquisition, and razor-thin margins. Brands aren’t investing in e-comm, in fact they’re seeking ways spend less.

Here’s where things get interesting: many retailers are quietly shifting their attention back to stores. Why? Most importantly, Gen Z prefers it. Study after study point to the next generation preferring to shop in person, as they seek experiences, social interactions, and connection to the brands they frequent. The litany of DTC brands aggressively expanding their brick-and-mortar footprint speaks volumes about this shift.

Stores also offer three things digital can't:

1. Experiential differentiation — Sensory, local, human — things that can’t be replicated by an algorithm. Retailers are recognizing that the battlefield is less about product and price, and increasingly about connection, community, and brand theatre. Customers are seeking an experience.

2. Fulfillment leverage — Increasing the ratio of fulfillment via store networks (BOPIS, ship-from-store) means better margin control and lower logistics drag. Many chains are already at or beyond 1/3 of online sales being touched by stores. Each BOPIS interaction is an opportunity for an additional sale, and stores offer fewer variable costs per sale.

3. Underbuilt infrastructure — Decades of capital pouring into e-comm diverted attention from physical infrastructure. The ROI on investing in stores is massive with opportunities that abound in: data-driven layouts, localized assortments, flexible modular formats, experiential programming, reverse logistics in-store, resale/circular integration, etc.

The Next Retail Revolution

What makes this disconnect so fascinating is that investors are doing what the best investors do: pattern recognition.

Unfortunately, the last 25 years trained investors on one dominant signal: retail winners scale digitally. Every success story — from Amazon to Shopify to the DTC boom — reinforced the same pattern. The mental model became muscle memory: digital equals growth, physical equals drag.

But pattern recognition can become pattern blindness. The story that was true for the last two decades is now distracting from what’s happening out in the open. The frontier isn’t online anymore; it’s on the store floor.

Retailers are investing into the opportunity, building data-rich, service-driven, experience-centric stores — emerging from decades of underinvestment.

A brand partner recently lamented to me that they are tired of hearing their CEO say, “why can’t you show me data like the digital team does?” Increasingly they can, and investors should be excited about fueling the shift from clicks back to bricks.