Wait a minute. Are we talking about the same controller as in this topic? If so it, indeed, “behaves” like a keyboard and not as a game controller. To use it do:
Make sure no keyboard is connected to your Pi (other than the X Arcade Stick), connect a controller to navigate through RetroPie’s menus and:
In RetroPie/Emulationstation go to: “RetroPie (the config menu) –> RetroPie setup –> Setup/configuration (to be used post install) –> Configure Retroarch controller –> Configure keyboard for use with RetroArch”.
It should pop up a wizard that asks you to press keys on your keyboard (to use instead of a controller).
Then press keys on your ‘AES stick’.
Now remove the temporary controller and use the X Arcade Stick to play.