The 8.7 billion shakeout who’s buying what retail is selling

Introduction: The 8 Point 7 Billion Proptech And Retail Shakeout

Nearly 8.7 billion dollars in proptech funding during the first nine months of 2025 has triggered a shakeout in retail focused technology and commercial real estate tools. We are at the beginning of a new era for retail, as this capital wave represents more than venture optimism. It signals a fundamental restructuring of how retail sales happen, who controls customer data, and which companies survive the next cycle. Rising prices due to inflation are squeezing both consumers and retailers, driving up operating costs and reducing discretionary spending, which accelerates the shakeout.

This funding surge is forcing retailers, landlords, and tech startups to prove who is actually converting AI and data tools into real sales and leases. The smart money is no longer betting on pilots or proof of concepts. Investors now demand verifiable unit economics, measurable revenue lift, and clear paths to profitability before writing checks. The days of “move fast and figure it out later” are ending across the retail sector. The industry is experiencing a “K-shaped” economy, where high-performing, technology-driven retailers are pulling ahead, while traditional stores are struggling to keep up.

This article answers two questions that matter in 2025 and 2026: Who is buying what retail is selling, and which technologies and formats are winning funding and customer spend? For context, consider that US retail sales reached roughly 5.7 trillion dollars in 2017, and e commerce has grown from a fraction of that total to projections exceeding 7.9 trillion globally by 2028. The brick and mortar stores that once dominated are now competing within a mixed channel reality where physical stores still capture 79% of transactions but online sales are accelerating. The bankruptcy of luxury giants like Saks Global signals that middle-ground retailers are losing relevance in 2026.

Key Themes to Watch:

• AI as infrastructure, not a standalone gadget
• Investor discipline replacing experimental pilots
• Consumer demand shifting toward health, value, and experience

The 8 Point 7 Billion Funding Wave: What It Actually Covers

Proptech startups raised almost 8.7 billion dollars in venture capital during the first three quarters of 2025, with a disproportionate share tied to retail and commercial real estate use cases. This is not spray and pray capital. Investors are targeting specific pain points across the value chain, from tenant underwriting to customer personalization.

The funding breaks down across several clusters:

Retail Underwriting and Risk Tools Platforms like Bonside offer AI driven underwriting that helps landlords and lenders evaluate multi unit operators. These tools analyze unit economics, foot traffic patterns, and financial health before capital gets deployed. Several nine figure funding announcements landed between late 2024 and Q3 2025, with investors like Kimco Realty and Nuveen Real Estate publicly tying capital to AI depth.

Health and Wellness Personalization Platforms As the US health and wellness market surpassed 2 trillion dollars, investors poured money into AI systems that personalize supplements, fitness services, and telehealth linked retail. These platforms use anonymized consumer behavior data to predict which products resonate in specific zip codes.

Omnichannel Analytics and In Store Experience Tech Tools that bridge online and physical stores are attracting significant investment. These platforms track customer journeys across channels, optimize inventory distribution, and personalize offers in real time. Landlord focused data platforms also fall here, helping property owners understand tenant productivity and consumer traffic at granular levels.

The shift from 2020 and 2021 is clear. Back then, funding went to experimental pilots. Now, in 2024 and 2025, capital flows toward infrastructure bets where AI is embedded all along the value chain, from underwriting and inspections to risk assessment and marketing.

Economic Factors Shaping the Retail Shakeout

The current shakeout in the retail sector is being driven by a complex mix of economic forces that are reshaping the industry from the ground up. Over the past two decades, private equity firms have poured more than $116.5 billion into 95 retail acquisitions, according to research from Debtwire, Pitchbook, and Retail Dive. While this influx of capital once fueled rapid expansion for department stores and traditional brick and mortar retailers, the landscape has shifted dramatically.

A decade ago, low interest rates allowed retailers to take on significant debt to finance growth and store openings. Today, with higher interest rates and changing consumer behavior, many of these same companies are struggling to service their balance sheets. Department stores and legacy chains that once dominated the market are experiencing a steep decline in sales, as shoppers increasingly turn to online sales and e-commerce platforms for convenience and selection.

The rise of e-commerce has fundamentally altered the way retailers operate. Companies are investing heavily in online sales channels, digital marketing, and advanced distribution networks to meet customer expectations for fast, seamless shopping experiences. Physical stores remain a vital part of the retail landscape, but they must now offer unique experiences—such as entertainment venues, curated product assortments, and community events—to attract foot traffic and compete with online competitors.

Smart money is flowing toward retailers that can adapt quickly to these new realities. Dollar General, for instance, has leveraged data-driven site selection and inventory management to expand its footprint and capture resilient demand, even as other chains like Party City face mounting debt and declining sales. Home goods retailers such as Target and Walmart are thriving by combining robust e-commerce platforms with a wide range of products and efficient supply chains, positioning themselves as leaders in both online and physical retail.

In contrast, apparel retailers and some specialty chains are struggling to keep pace with fast-fashion competitors and the relentless shift toward digital commerce. The industry is more competitive than ever, with companies vying for the same customers and market share. Investors are increasingly focused on retailers that demonstrate innovation, agility, and a strong online presence, backed by solid financials and the ability to manage inventory with precision.

The impact of the retail shakeout extends beyond retailers themselves. Landlords and commercial real estate owners are rethinking their portfolios, repurposing or redeveloping properties as stores close or downsize. This transformation is rippling through the entire supply chain, affecting manufacturers, logistics providers, and distribution companies.

Looking ahead, the retail sector is expected to continue evolving, with a growing emphasis on e-commerce, technology, and customer experience. Innovations such as artificial intelligence and virtual reality are poised to further enhance the way shoppers interact with brands, both online and in physical stores. Retailers that invest in the right technologies and strategies—staying ahead of consumer trends and leveraging data to drive decisions—will be best positioned to succeed in this new era. Those unable to adapt risk being left behind as the industry continues its rapid transformation.

Who Is Actually Buying Retail AI: Landlords, Brands, And Lenders

The key buyers of AI powered retail tools fall into four groups: landlords, retailers, lenders, and data intermediaries. Each has distinct motivations, but all share a common decision rule.

Landlords are purchasing tenant scoring systems, lease underwriting engines, and portfolio risk dashboards. Major shopping center and mixed use owners use these tools to decide which brands to back in 2025 and 2026. They want to know which tenants will thrive and which will struggle before signing long term leases. The goal is reducing vacancy risk and improving tenant productivity across locations.

Retailers across apparel, grocery, beauty, and health and wellness are buying AI agents for marketing personalization, inventory optimization, and site selection. Walmart exemplifies this with AI recommendation engines operating across app, website, and in store experiences. The company plans 150 new or converted stores and 650 remodels to Stores of the Future, emphasizing omnichannel integration and expanded selections. Retailers are also using AI to address staffing challenges, support employee productivity, and improve labor planning, especially as employee-related costs and issues like burnout and dissatisfaction have become more prominent. Importantly, AI is intended to support retail decision-making and employees, not to replace human workers. Traditional retailers without similar capabilities are losing ground to competitors who invest in innovation.

Lenders and Alternative Capital Providers are purchasing AI scorecards to analyze unit economics for multi unit operators. Since 2023, these tools have helped creditors avoid the mistakes that plagued earlier leveraged retail deals. Instead of relying on top line revenue projections, they now access real time performance data and predictive models before backing expansion.

Data and Research Intermediaries use AI agents to scan filings, earnings calls, and social data daily. These firms curate actionable retail insights for institutional clients, helping investors make faster decisions about which retailers and real estate assets deserve capital.

Despite different buyer types, the common decision rule is verifiable revenue lift or risk reduction measured over specific windows. Three month test campaigns and first lease term cohorts are typical benchmarks. If a tool cannot demonstrate measurable impact within these timeframes, buyers move on.

What Consumers Are Buying: Health And Wellness, Value, And Experience

In parallel with the proptech funding wave, consumers in 2024 and 2025 channeled spending into three big buckets: health and wellness, value driven retail, and experiential formats. Understanding these patterns is essential for anyone trying to figure out who is buying what retail is selling.

Health and Wellness

• The US health and wellness market surpassed 2 trillion dollars by mid decade
• AI powered personalization now shapes supplements, fitness services, and telehealth linked retail
• Retailers use predictive models to select which health products to stock by zip code based on anonymized spend and demographic patterns
• GLP 1 drug users are driving demand surges that shift apparel size assortments toward smaller inventories
• The rise of weight-loss drugs has caused an estimated $6.5 billion in lost U.S. grocery sales due to reduced snacking.
• Organic produce and sustainable items have seen increased demand driven by health concerns and availability.
• Younger generations, particularly Gen Z, are emphasizing sustainability in their consumption habits.

Value Driven Retail

• 28% of consumers actively trade down to discount retailers, accelerating value first decisions
• 23% consolidate spending into warehouse clubs for bulk efficiency over brand loyalty
• 19% switch to generic and store brands, emphasizing cost over premium positioning
• Dollar General and similar chains expanded footprints while using data to target trade areas with resilient demand
• Private labels surged to 277 billion dollars by end 2025, with Walmart launching BetterGoods, its largest private brand food launch in 20 years
• Private label brands are being pushed aggressively by retailers to offer lower prices, including Walmart’s “bettergoods” and Target’s “dealworthy.”
• The apparel sector witnessed the most precipitous plunge, with sales of clothing and accessories falling by more than 50%.
• There has been a significant shift in clothing purchases to online platforms, with e-commerce giants like Amazon, Shein, and Temu undercutting traditional brick-and-mortar clothing retailers by offering lower prices, greater convenience, and a wider selection.
• Staples such as hygiene products are seeing increased sales, with over 40% of consumers spending more on these items.
• Budget-conscious consumers are increasingly flocking to secondhand marketplaces and fast-fashion giants.
• Resale and rental are now mainstream, with 82% of Gen Z considering resale value before purchasing.
• Consumers are questioning their consumption habits and are more inclined towards minimalism and decluttering.
• The current environment reflects a “shift in consumer behavior” toward a value-seeking approach during economic volatility.

Experiential Retail

• Since 2017, stores have evolved into showrooms, service hubs, and community spaces
• Beauty flagships, sporting goods experience zones, and digitally native brands opening curated locations define the trend
• Gen Z and millennials demand seamless omnichannel, inclusivity, authenticity, and immersive in person experiences
• Entertainment venues and restaurants integrated into retail environments create destinations rather than transactions
• Many consumers are now more mission-oriented in their shopping, preferring quick trips to stores rather than leisurely mall visits.
• The pandemic has accelerated the shift towards cashless purchasing and contactless transactions.

Kantar projects that Walmart, Amazon, and Costco will capture a third of all US retail sales and 32% of online spending in 2025, driving 57% of growth through 2030. This concentration among top players reflects how well they serve these three consumer demand buckets.

The Retail Real Estate Shakeout: Store Closures, Winners And Losers

Even as funding pours into AI and analytics, the physical network of US retail is still being rationalized. Store closures, bankruptcies, and repositionings continue to reshape the landscape for landlords, communities, and workers alike.

Timeline of the Shakeout:

• 2017: Department stores and national chains began announcing hundreds of closures as e commerce share climbed. Sears, Toys R Us, and other anchors entered steep decline. The retail apocalypse narrative gained traction.
• 2020: The pandemic accelerated digital adoption and exposed which business models could adapt. Many apparel and accessories chains that relied on foot traffic struggled. Home goods retailers with strong commerce capabilities thrived while others faltered.
• 2024: Party City and other specialty chains exited weaker secondary markets. Department stores continued downsizing. Midsized apparel bankruptcies became common as inflation and high interest rates pressured both consumers and balance sheets. Walgreens announced hundreds of closures as the drugstore model faced reinvention.

The winners stand in sharp contrast. Dollar stores, warehouse clubs, high productivity grocers, and select specialty retailers expanded footprints while using data to target trade areas with resilient demand. These companies invested in supply chain efficiency, maintained clean balance sheets, and adapted merchandise to match shifting consumer behavior.

AI enhanced site selection tools and landlord underwriting platforms now push capital toward centers with strong tenant productivity and consumer traffic. Weaker properties face accelerated exits as owners and investors redirect resources toward locations with verifiable performance. A decade ago, such precision was impossible. Today, it shapes every major investment decision.

Private Equity And Credit: Who Got Burned, Who Adapted

Since 2002, private equity firms have deployed more than 116.5 billion dollars into at least 95 retail acquisitions. Many of these leveraged deals struggled as consumer behavior shifted and e commerce reshaped the market.

Key Lessons from the PE Retail Wave:

• Roughly one third of the largest leveraged buyout backed retailers entered bankruptcy or operated under clear financial distress by the late 2010s
• Claire’s, Mattress Firm, and Toys R Us became cautionary tales of how debt burdens can crush companies when sales decline
• High interest rates and shifting consumer preferences exposed retailers that relied on financial engineering rather than operational excellence
• Deals structured a decade ago often failed to account for the speed of digital transformation

By the mid 2020s, credit investors and alternative lenders started leaning on AI based underwriting tools to avoid past mistakes. When backing chains with multiple brick and mortar locations, they now demand granular unit economics and real time performance data before committing capital.

Success Stories and Adaptations:

• Dollar General returned to public markets with a healthier balance sheet after operational improvements and sharper merchandising
• Michaels demonstrated that right sized debt and focused execution could stabilize a retail business
• Home goods retailers that invested in distribution and inventory management outperformed peers who neglected supply chain fundamentals

The 8.7 billion proptech funding wave aligns with this lesson cycle. Investors now understand that leverage first strategies create risk without reward. Data first strategies, backed by AI tools that provide visibility into every store and every transaction, offer a better path forward.

AI As Core Infrastructure, Not A Gadget

By 2025, AI in retail and commercial real estate is viewed less as a standalone product and more as core infrastructure. It sits alongside payment systems, inventory management, and customer databases as essential technology that touches every decision.

How AI Functions as Infrastructure:

• Vertical specific models handle underwriting, inspections, risk scoring, marketing, and demand forecasting
• Landlord credit dashboards automate lease decision engines and tenant evaluation
• Retailers use AI for labor planning, assortment optimization, and dynamic pricing
• Real time inventory systems cut stockouts and boost margins while predictive analytics minimize waste

Investors now look for depth of AI integration across the value chain. They ask how many decisions per day an algorithm influences, not whether a company has an AI pilot. Surface level deployments no longer impress. The research shows 87% of retailers deploy AI in at least one area, with 60% planning increased spending. IDC forecasts 31.9% year over year AI spending growth from 2025 to 2029.

Retailers leading in AI adoption often start with focused use cases such as marketing or merchandising. Once early wins are validated, they expand into labor planning, assortment, and pricing. This phased approach reduces risk and builds internal capabilities over time.

Human oversight remains essential. Revenue managers, real estate directors, and credit committees interpret AI output and overrule models when local knowledge indicates exceptions. The technology supports decisions; it does not replace judgment.

Practical Guidance for Evaluating AI Vendors:

• Ask how the tool integrates with existing data infrastructure
• Demand clarity on model governance and bias controls
• Verify measurable impact on sales, risk, or efficiency
• Ensure the vendor has sufficient capital to survive the current shakeout

Retail Leads AI Adoption Across Commercial Real Estate

Among commercial sectors, retail is currently the most advanced in operational AI adoption. It leads ahead of office, industrial, and hospitality on a per decision basis because retail generates more data, more frequently, with faster feedback cycles.

Why Retail Leads:

• Retailers track customer journeys, predict buying patterns, and personalize offers across email, mobile apps, and in store interactions
• Transactions are frequent and results are easily measured in weekly or monthly sales
• This data feeds directly into landlord decisions about tenant mix, co tenancy clauses, and redevelopment plans
• Open air centers and mixed use districts benefit most from retailer data visibility

Walmart demonstrates leadership with AI recommendation engines across every channel, real time inventory management, and QR codes integrated into store experiences. The company uses predictive analytics to optimize everything from shelf placement to staffing levels.

This retailer data is strategic for landlords. When property owners understand which tenants are thriving and why, they can make smarter decisions about leasing, investment, and repositioning. Deloitte notes that 68% of executives are deploying agentic AI for operations, and this trend accelerates as retail proves what works.

By 2026, insights from retail AI deployments will migrate into other asset classes. Office amenity design, residential mixed use curation, and industrial distribution networks will all benefit from lessons learned in the retail proving ground. The shop floor is teaching the industry how to operate smarter.

How To Decide Which Retail Tech To Buy In The Shakeout

Retailers, landlords, and lenders must choose tools amid crowded 2025 and 2026 vendor landscapes. The following criteria separate proven solutions from hype.

Evaluation Criteria for Retail Technology:

1. Measurable Impact on Sales or Risk Demand specific metrics before committing. Tools should demonstrate verifiable lift in conversion, reduction in days vacant, or improved collections. General promises are not enough.
2. Payback Period Understand how long it takes to recover your investment. The best tools show returns within 90 to 180 days, not years.
3. Integration with Existing Data Infrastructure New technology must work with current systems. Watch for hidden costs of integration and data migration.
4. Model Governance and Bias Controls Ask how the vendor handles model updates, bias testing, and explainability. Regulators and customers increasingly expect transparency.

Practical Implementation Steps:

• Start with a single high visibility use case such as marketing automation, site scoring, or tenant risk dashboards
• Define pilot periods of 90 days with explicit success metrics
• Assign internal owners who can interpret results and advocate for expansion
• Create sign off processes that involve relevant stakeholders from technology and business teams

Vendor Capital Health

In the middle of the 8.7 billion shakeout, weaker startups will fail or be acquired. Before signing long term contracts, understand your vendor’s funding status and runway. Getting stranded with orphaned technology creates risk and cost that smart buyers avoid.

Conclusion: Who Wins The 8 Point 7 Billion Retail Shakeout

The winners in this shakeout are those who align AI powered infrastructure with clearly defined consumer demand in health and wellness, value formats, and experience driven retail. They treat technology as essential plumbing rather than a marketing story. They measure every decision against verifiable revenue lift or risk reduction.

Landlords, lenders, and retailers who adopt disciplined data driven decision making are better positioned than those chasing scale without unit level insight. The lessons from private equity failures over the past two decades are clear: debt without operational excellence destroys value, while data powered precision creates it.

By 2026 and 2027, the line between retail brands, real estate owners, and data platforms will continue to blur. Co investment in shared AI systems will become standard practice as each party recognizes that collaboration beats isolation. The companies that profit will be those who watched these trends early and acted decisively.

Three Takeaways:

• AI as infrastructure: embed it across the value chain, not as a feature
• Capital discipline: demand unit economics and measurable results before deploying money
• Consumer centric format innovation: invest in health and wellness, value, and experiential retail where demand is structural

The shakeout is here. The question is whether you are buying what the winners are selling or watching from the sidelines as the industry transforms around you.