The retail landscape has experienced a significant transformation as online sales have overtaken traditional brick-and-mortar transactions for the first time. This shift, which has been years in the making, signals a pivotal change in how consumers shop and make purchasing decisions.
As of 2026, excluding categories like automotive and groceries, online and digitally influenced transactions now account for more than 50% of retail sales. This transition feels abrupt only because the retail industry has been analyzing data through a misleading lens. According to recent Census data, eCommerce penetration in 2025 was reported to be approximately 16 to 17% of retail sales. However, this figure obscures the reality of consumer behavior and the growing dominance of online shopping.
Online sales have already claimed a substantial share in discretionary categories such as apparel, electronics, home goods, and beauty products, where eCommerce accounts for between 30% to 50% of total sales. This trend has had a profound impact on department stores that once thrived in malls, such as Macy’s and Sears, which have seen their relevance erode over time.
Decline of the Department Store
The decline of department stores marks a significant inflection point in retail history. In 1990, department stores represented approximately 14.5% of U.S. retail sales. By 2024, that figure had plummeted to just 0.5%. Dollar sales peaked in 2001 and have since experienced a steady decline. The loss of these retail giants has destabilized the entire retail ecosystem, particularly affecting smaller specialty retailers that relied on the foot traffic generated by department stores.
As of late 2024, around 1,100 malls remained in the United States, with vacancy rates soaring to nearly 9%, more than double the overall retail average. Class C malls experienced even higher vacancy rates, exceeding 13%. The consequences of anchor store closures are significant, affecting the survival of smaller retailers that depend on high foot traffic.
Even the luxury retail sector has not been immune to these changes. The merger of Saks and Neiman Marcus in 2024 was presented as a strategic move, but it now appears driven by the pressures of a declining market. The potential bankruptcy of this merged entity by the end of 2025 could further jeopardize Class A properties, exacerbating the challenges faced by malls across the country.
The Shift to Online Aggregation
The core function of department stores—aggregating and curating products—has become obsolete as shopping has transitioned online. The new anchors of retail are now digital platforms, including search engines, marketplaces, and social media feeds. These platforms utilize algorithms and AI to streamline the shopping experience, providing consumers with curated selections and facilitating quick purchasing decisions.
For over a century, department stores addressed the “too much choice” dilemma by offering trusted assortments. Digital platforms have supplanted this role, making it easier for consumers to find what they want through low-cost searches and vast selections. AI agents have further simplified the process, allowing consumers to compare products and make decisions without needing to physically browse.
The crossover in 2026 is not just about online sales surpassing traditional retail; it marks a fundamental shift in the economic rationale for physical retail. As digital platforms eliminate the constraints of physical presence and shelf space, the traditional role of stores as primary discovery points is diminished.
While physical retail will not disappear entirely, its role will evolve. Stores will increasingly function as fulfillment centers, pickup locations, and showrooms rather than the central hubs of the retail ecosystem. The transition to omnichannel shopping—where consumers initiate purchases online and finalize them in-store or vice versa—will become the norm.
In summary, the department store’s decline did not stem from a decrease in consumer interest but rather from its core functions moving to digital platforms. As of 2026, the retail landscape will irrevocably change, with online commerce emerging as the primary venue for aggregation, discovery, and decision-making in shopping. The full implications of this shift will continue to unfold in the years to come.
