Retail’s Loyalty Crisis

Retail is in the middle of a reckoning.

• Economic turmoil, rising operating costs, and shifting consumer habits are driving a wave of store closures, cutting off many of the face-to-face interactions that once built loyalty.
• U.S. consumers are spending more selectively, trading down in categories like apparel and home goods, and looking for convenience above all else.

As the physical touchpoints disappear, rising expectations have shifted to digital channels: making the contact center the new storefront.

The gap between what shoppers demand and what retailers can deliver is widening. And the stakes for loyalty and revenue have never been higher.

At the same time, virtual agents are increasingly taking on repetitive work, while human agents focus on higher-impact interactions like retention, renewals, and cross-sell and upsell opportunities. That shift is elevating the role of the contact center from a cost center to a true driver of revenue and loyalty.

Most Retailers Aren’t Prepared

Here’s just one example. Our research shows that 67% have yet to digitize their customer service for the mobile era. Even though smartphones was one of the top factors influencing purchasing decisions in 2025.

Meanwhile, AI and other tech advancements have raised the bar for speed, convenience, and personalization. But most service platforms were designed for another era.

The gap between what shoppers demand and what retailers can deliver is widening. And the stakes for loyalty and revenue have never been higher.

Closures Are Accelerating the Pressure

At the same time, up to 15,000 U.S. retail locations are projected to have shut down in 2025: more than double last year’s total.

That leaves the burden of customer interactions squarely on digital channels. Yet many contact center systems remain optimized for speed and volume rather than empathy and continuity.

In an online-first world, that gap is glaring: customer context - past orders, loyalty status, in-app behavior - often vanishes the moment a shopper switches channels. Agents are left without visibility, and trust erodes at the exact moments when retailers can least afford it.

The New Fragility of Loyalty

Yet a shift to digital-first service has made loyalty harder to hold onto than ever. Today, a single frustrating experience can turn a customer away: and younger generations are leading the charge.

According to Salesforce data cited by an eMarketer article, “Brand loyalty is fading among Gen Z and millennials”, 81% of Gen Z and millennial consumers switched brands in 2024: showing how quickly poor experiences now drive churn.

And according to our analysis, nearly half (46%) of customer experience (CX) leaders say mobile-friendly service will influence buying decisions: more than AI support, empathetic agents, or short wait times.

While older cohorts still place a higher value on agent empathy and shorter wait times, their expectations are converging with those of younger shoppers as digital becomes the default.

This generational shift and convergence means the tolerance for outdated, fragmented experiences is shrinking every year. What once might have been forgiven - restarting a conversation across channels or waiting days for a resolution - now costs retailers real revenue.

The problem is that most journeys still break down at the seams. Customers who begin returns in an app often must start over when they switch to voice. Agents ask repetitive questions because loyalty, purchase, and service data remain siloed.

In an era where shoppers expect instant, personalized support, that disconnect makes even the most advanced AI tools feel outdated. And with Gen Z and millennials shaping the next era of retail spending, the cost of falling short today will only grow.

AI: Cost-Cutter or Customer Support?

Many retailers are turning to AI, even in the face of it not being as important as other factors in driving customer loyalty. That is because it promises instant support, smarter routing, and improved personalization at scale: the very things legacy systems have failed to deliver.

But in practice, AI is too often treated as a cost-cutting tool to replace agents rather than a way to close these gaps. This approach has already led to layoffs and hiring slowdowns, with AI-related workforce reductions up nearly 300% in 2025.

According to our analysis, 60% of AI deployments in the contact center remain “low maturity,” limited to basic tasks, and disconnected from broader strategies. The result: more bots, fewer people, and no real gains in customer satisfaction.

The risk is bigger than wasted investment. Poorly implemented AI can frustrate customers with endless loops, lead to increased churn, and even introduce bias or privacy concerns if training data isn’t managed carefully.

Yet there is a powerful opportunity for AI, especially in retail customer service. It lies in using AI to support, not replace, the human element.

When deployed well, AI can:

• Surface order status instantly, pass context seamlessly to a live agent, and free that agent to solve the real problem.
• Spot patterns in support data that predict churn or trigger proactive outreach before an issue escalates.

Real-time agent assist tools can now guide staff through next-best actions, like saving an at-risk customer or handling a renewal.

By helping agents drive revenue and resolve issues, these tools show that technology can enhance, not replace, the human touch, laying the foundation for reinvention.

The Playbook for Service

Amid store closures, shifting generational preferences, and rising pressure from new technology, one thing is clear. The contact center has become retailers’ frontline for protecting revenue, loyalty, and trust.

To succeed, leaders should:

• Build mobile-first channels. Meet customers where they already are: in-app, via SMS, or through rich messaging.
• Unify customer data. Connect loyalty, eCommerce, and service systems so agents have context at every step.
• Use AI strategically to empower agents. Automate simple requests, surface insights, and route issues intelligently so agents can focus on higher-value interactions.
• Redefine the agent role. Train frontline staff as brand advocates who deliver empathy and context and shift the focus from handle time to outcomes such as revenue contribution and retention.
• Design for continuity. Ensure journeys flow seamlessly across channels, so customers never need to start over.
• Measure what matters. Track customer effort, resolution speed, retention, CSAT, NPS, revenue contribution, and lifetime customer value: not just call handle times or cost-per-contact.

For today’s shopper, the contact center is the brand experience. Every exchange signals whether a retailer values their time and loyalty.

Train frontline staff as brand advocates who deliver empathy and context and shift the focus from handle time...

The retailers that win will be those that treat service as core to their business model. Namely investing in mobile-first experiences, using AI to empower rather than replace agents and equip them to deliver empathy at scale.

The future of retail won’t be defined only by products or prices. It will be defined by the quality of service when customers need it most: from prospecting to sale close, and to post-sale service and support.

Those that get it right will keep customers through uncertainty. And they will set the standard for loyalty in the years ahead.