Five physical-product brands disclosed simultaneous brick-and-mortar expansion plans in early 2025, a move documented by Modern Retail as part of a broader operational shift: artificial intelligence tools have reduced back-end costs enough that the savings now fund new store openings instead of digital marketing spend.
Rhone, Anthropologie, Kohl's, Brunt Workwear, and Crocs each confirmed active store-opening pipelines. The common thread, according to executives interviewed by Modern Retail, is that AI-driven efficiency in inventory management, demand forecasting, and customer service has freed budget previously earmarked for e-commerce operations. Rather than plow those gains into paid social or programmatic display, the brands are signing leases.
The mechanism works in two directions. First, AI tools reduce the marginal cost of running a store—automated inventory replenishment cuts labor hours, predictive analytics lower overstock waste, and chatbots handle tier-one customer questions that once required store associates. Second, the brands report that physical locations now generate data streams that feed the AI models, creating a compounding return: stores become distribution points and data-collection nodes simultaneously. Modern Retail notes that this dual function makes the unit economics of a new store more favorable than they were three years ago, when digital acquisition costs were lower and AI tooling was less mature.
Anthropologie and Kohl's, both operating at scale, cited store expansions as part of omnichannel strategies that treat the physical location as a fulfillment hub for online orders, a return point, and a brand experience center. Rhone, Brunt, and Crocs—brands with smaller footprints—emphasized that stores allow them to bypass rising digital ad costs entirely for certain product lines. A Brunt executive told Modern Retail that the company's workwear customer prefers to try boots in person, and that a single store in a target market generates more qualified leads than six months of Meta spend at comparable cost.
The steal for a small physical-product brand is straightforward: treat a store—or a branded space inside a retail partner—as a customer-acquisition channel that competes on cost with paid digital, not as a romantic brand statement. Run the numbers. If you sell a product with a high return rate or a complex size/fit/feature set, calculate your blended customer acquisition cost from digital channels over the past twelve months. Include ad spend, platform fees, return shipping, and customer service hours. Then model a minimal physical presence: a 200-square-foot booth inside a maker market, a trunk-show series at gyms or job sites, or a lease-by-the-week space in a downtown corridor. Staff it with one person, stock 50 units, and track conversion rate and basket size over sixty days. Most small brands will find that in-person conversion rates run 3x to 8x higher than cold digital traffic, and that the customer acquired in person has a 40% to 60% lower return rate. The AI component comes in after: use free or low-cost tools like Google Sheets scripts or Shopify inventory apps to auto-generate restock orders based on daily sell-through, and deploy a chatbot on your site to handle the tier-one questions that used to require you to staff the booth all day. The labor cost drops; the data quality rises.
For brands already running digital campaigns, the message from Rhone and Brunt is that store investment is not a retreat from e-commerce but a recognition that the marginal return on the next dollar of Meta or Google spend has fallen below the return on a square foot of retail space in the right ZIP code. The AI savings make the space affordable; the space makes the brand legible in a way that a carousel ad cannot.
AI cuts store operating costs enough that physical retail now competes with digital CAC, and in-person conversion rates run 3x-8x higher for complex products.
Editorial & Disclosure Notice: This article was written with artificial intelligence from public sources and is published without individual human review. Artificial intelligence and other digital tools are also used for research, analysis, editing, formatting, and production. Errors, omissions, outdated information, or inaccuracies may occur. References to companies, brands, products, services, organizations, or individuals are for informational and editorial purposes and do not imply endorsement, sponsorship, affiliation, partnership, or approval unless expressly stated. All trademarks and other intellectual property remain the property of their respective owners. Opinions, analysis, estimates, and commentary are informational only and should not be construed as financial, investment, legal, tax, medical, procurement, or other professional advice. Information may be corrected, clarified, or updated after publication. Corrections or removal requests: jenny@pops4.com.
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