Retail reset: Why Gen Z is forcing a rethink of stores, space and strategy

The US retail landscape is undergoing a structural reset. From the bankruptcy of Saks Global to real estate downsizing and the reinvention of New York’s Fifth Avenue, the sector is shifting away from scale in favour of precision. At the same time, the evolution of mixed-use developments and experiential retail hubs is redefining how physical spaces function.

Retail is not disappearing, however. Instead, it is being redefined by a new consumer base, Gen Z, a group that knows what they are looking for in a space to engage with. Their widening purchasing power, intertwined with strong expectations around convenience, access, and value, is pushing retailers and shopping destinations to recalibrate how they serve their customers.

The urgency of evolution cannot be understated. Saks Global’s bankruptcy earlier this year dealt a blow to the industry, thrusting doubt over major retail destinations and their links to brand partners. The filing comes amid a broader transformation of Fifth Avenue, which is experiencing a unique merging of a 400 million dollar redesign, record-low retail availability, and high-end investment, making 2026 a defining year for the retail destination.

Elsewhere, department store giants like Macy’s, Kohl’s and JCPenney are actively “right-sizing” their portfolios, while shopping centres are being reimagined into mixed-use, experience-led environments.

Yet to understand where retail is truly going, the industry may need to stop looking at executives, and start addressing Gen Z directly. For this emerging shopping group, the disconnect between what is being offered and what is desired is becoming increasingly apparent, and is not rooted in a lack of interest in physical retail, but in a lack of relevance.

To get a better understanding of what is needed from retail, FashionUnited spoke to three members of The Z Suite, a group of Gen Z professionals assembled by BCG PR who exist in the industry both as consumers and industry insiders across buying, strategy and community marketing. Their perspectives offer a dual lens, revealing not only how they engage with retail today, but where they see misconceptions and shortcomings.

Online

Off the bat, one of the most persistent misconceptions surrounding Gen Z is that they are fundamentally digital-first shoppers who prefer avoiding physical retail altogether. While it is true that this generation is deeply embedded in the digital realm, the interviews suggest this narrative may be overly simplistic.

“I think that the biggest misconception is that [Gen Z] only shop online,” Fatmata, a member of the Z Suite and retail professional said. “I think that when you don’t create an environment that’s conducive to Gen Z, it doesn’t surprise me that they’re not there. We exist in the world, we don’t just exist on the internet.”

Rather than replacing stores entirely, online channels are reshaping the use of commercial spaces. For many Gen Z consumers, the shopping journey begins digitally and is completed physically. “Personally, I like to shop online first, find what I like, and then go into the store to try those items on,” said Lindsey Hyams, who highlighted a behaviour that relies on efficiency, intentionality and tactility.

This hybrid approach is reflected in broader industry findings, including Deloitte’s ‘Global Retail Outlook 2025’, which notes that Gen Z expects a seamless integration between online and offline environments. In McKinsey’s ‘State of Fashion 2025’, meanwhile, the continued importance of stores is underlined, with their role emphasised for product discovery and brand engagement.

The issue, then, is not that Gen Z has abandoned stores as a whole. It’s that stores have not evolved quickly enough to meet their expectations. As Fatmata explained, many physical spaces actively deter engagement due to poor execution. “They’re too big, hard to navigate, poorly maintained, or understaffed.”

These issues have materialised in various ways. Fitting rooms, once a cornerstone of the in-store experience, for example, have largely deteriorated post-pandemic. “They’re often messy, understaffed, or confusing to use,” she said. Long checkout times, driven by labour cuts and a shift towards digital fulfilment further escalate difficulties and point to declining tolerance rather than lower demand.

Experience

If the store is to remain relevant, the experience must move beyond surface-level spectacle to instead focus on execution. Across the interviews, it became clear that there was a rejection of the industry’s tendency to equate “experience” with immersive or gimmick-driven concepts. Instead, effective experiences were identified as those that remove friction and enhance human interaction.

“I think that the best use cases for AI are actually the ones customers don’t see,” said Fatmata, when asked about the increasing and sometimes divisive use of AI-powered features in stores. “It should handle the friction points: checkout, personalisation, supply chain efficiency.”

This reframes the role of technology in retail, with AI viewed as most valuable when integrated into the operational backbone, enabling personalised recommendations, improving inventory responsiveness, and creating continuity across channels.

At the same time, the human element remains imperative, particularly to Fatmata, who said her experience at a Skims store illustrated how service can elevate retail beyond transaction. “The store was clean, bright, and thoughtfully designed. The staff was welcoming without being overbearing. They suggested an item they thought I’d like, and I ended up buying it.”

James Turco, another Gen Z retail professional, reaffirmed this perspective on quality and consistency, particularly in the context of destination retail. “When you walk into a store, the experience should feel like a flagship: how it looks, how it feels, the level of service. That should apply regardless of whether it’s department store, off-price, or full-price retail.”

These insights align with research carried out by both Bain & Company and Forrester highlighting that customer experience, particularly staff interaction, is one of the strongest drivers of loyalty. Experience for Gen Z is therefore not about theatrics, but more about ease and human connection.

Convenience

While experience can help to differentiate stores, convenience has become somewhat of a baseline expectation among Gen Z. “The stores should feel like an extension of the online commerce,” said Fatmata, emphasising the need for seamless integration across touchpoints. This includes everything from efficient returns to in-store pickup, as well as expectations around navigation and transparency.

Lindsey pointed to brands that successfully translate digital convenience into physical environments. At Target, for example, an “incredibly helpful” app tells you where an item is in-store. Similarly, Old Navy’s fitting room technology, which allows customers to request sizes, view pricing, and build a cart in real time, exhibits how digital functionality can enhance physical retail.

Curation

Next to the standardisation of convenience, many retailers are also focused on diversifying their product mix, shifting away from abundance and towards curation. “A few years ago, the buzzword was ‘authenticity’. Now, I’d say the buzzword is ‘curation’,” said James. “Somewhere within that sits the right mix of price, ethics, and experience.”

This responds to a growing fatigue with overassortment, meaning large department stores, once defined by their breadth of offering, are now sometimes perceived as overwhelming. “I don’t necessarily need to have everything all together in that way,” Fatmata said.

In contrast, curated retail, typically defined by intentional collaborations, limited drops, and focused assortments, is resonating more strongly. Lindsey pointed to Target’s partnership strategy as an example, calling the retailer’s collaborations with companies like Roller Rabbit “specifical, intentional edits”, with accessibility identified as key to their success.

This approach is mirrored more broadly throughout an industry in which retailers are increasingly prioritising localisation and data-driven merchandising. “It allows us to be more curated with a localised assortment to respond to that demographic’s needs,” Fatmata explained when referring to her own process at work.

Authenticity

The implication that Gen Z wants better choice over more choice goes hand-in-hand with an added desire for true authenticity, which is no longer defined by messaging, but by structure. “Gen Z can immediately recognise authenticity,” said Fatmata. “It’s not enough to just put up a Pride display for a month. You have to question if queer people are actually being hired or are there equitable policies.”

This shift has required brands to operate with consistency across both internal practices and external communication. Tokenistic gestures are quickly identified and often met with backlash, while genuine inclusion that is embedded into hiring, partnerships and decision-making helps to build long-term trust.

This, in turn, extends into evolving ideas surrounding ‘community’. In recent years, the concept of ‘community hubs’ have gained traction across retail, but Gen Z perspectives suggest a more nuanced reality.

Lindsey, for example, sees strong potential in community-led retail, particularly through events and direct engagement. “If Macy’s is selling Steve Madden, have their influencer manager in-store doing a pop-up event, making the community feel seen again,” she said. She also emphasised the value of exclusivity, citing early-access product drops as a way to reward loyal customers.

Fatmata counters this point, stating: “I don’t necessarily think that department stores need to serve the purpose as a community hub. I don’t think there’s anything wrong with the store being good at being a store.”

These contrasting views are ones that retail centres have needed to balance over time. While mixed-use developments and experiential spaces are increasingly demonstrating the potential of community-driven retail, success appears to largely depend on authenticity and relevance over forced positioning.

Food has emerged as a natural bridge between retail and social experience, particularly from the viewpoint of Fatmata, who said: “Gen Z likes to eat and there’s a lot of opportunities for retailers to have those elevated food experiences built in.”

Format

Debates over store formats specifically have also remained prevalent in the retail landscape. Some companies like Macy’s have experimented with smaller locations, for example, though their success remains unclear. Mid-2025 reports suggested Macy’s was considering closing a portion of its small-format fleet as part of efforts to right size its footprint, yet specific plans were never confirmed.

To James, testing new formats is a natural part of business. “There will always be a desire to optimise stores by sales per square foot,” he stated, noting that downsizing can improve productivity. At the same time, he emphasised that retail operates in cycles, with expansion and contraction occurring in response to market conditions.

For Fatmata, the advantages of smaller formats are more directly tied to customer experience. “It allows [the company I work for] to be more curated and more intentional,” she said, highlighting the ability to localise assortments and reduce duplication.

This aligns with data from JLL, which shows declining vacancy rates and rising rents across key US retail corridors, pushing the need for efficiency. Retailers are instead increasingly adopting a dual strategy, opening large flagship stores for brand-building, while smaller, localised formats exist for convenience and conversion.

Operations

Operational execution is a pain point that underlies these strategic shifts, with many of the frustrations expressed by Gen Z, from messy stores to poor staffing, exhibiting a breakdown of basic retail fundamentals. Investment is also increasingly moving towards digital fulfilment, often at the expense of in-store experience.

“There is definitely more emphasis on fulfilment, that imbalance is very noticeable,” Fatmata observed, noting the visible increase in in-store pickup and online order processing. Meanwhile, pressure to be agile is also growing. “If there’s a brand that’s going viral, why are we not reaching out to them right away,” she added, pointing to a need for faster decision-making and more responsive supply chains.

The future store

Together, these insights suggest a blueprint for the future of retail that relies on seamless, curated, agile, and intentional experiences. As a result, the role of the store is evolving beyond a catch-all destination into a more functional, experience-led environment that integrates with digital ecosystems.

All of this points to a retail landscape that isn’t dying, it’s just being edited. From Fifth Avenue’s transformation to the reinvention of malls and the restructuring of department stores, the industry is prioritising a focused, intentional model. As it evolves, Gen Z are raising the standard for it, meaning that for retailers to succeed they must adapt.