Digitalization of the retail industry has transformed how brands must account for customer experiences. Many consumers have been purchasing from retailers that allow them to virtually “try on” beauty and fashion products or see how a product looks in their living spaces. Extended Reality (XR)—including Augmented Reality (AR) and Virtual Reality (VR)—is the key enabler of these immersive and highly personalized shopping experiences. With 2 out of 3 consumers interested in using AR for shopping, retailers cannot ignore the appetite for XR-supported e-commerce. Additionally, and as will be pointed out later, XR can enrich in-store shopping as well.
While the retail space is no stranger to XR, the integration of Artificial Intelligence (AI) is an emerging trend. The XR-AI infusion brings shopping experiences to new heights, offering a more data-centric approach to marketing. While XR enables deep immersion into a retail platform, AI adds an extra level of personalization by analyzing customer behavior/preferences. Not only does integrating AI into retail XR drive sales for a brand, but it also reduces product return rates.
ABI Research expects rapid growth for AI-enabled XR devices in retail. While just 35% of XR devices shipped in 2024 come with an AI chipset, our analysts forecast that number to double to 70% by 2030, reaching 1.7 million shipments.
Chart 1: XR Shipments for Retail Usage with AI Chipsets
(Source: ABI Research)
How AI Complements XR Shopping
AI-driven XR technologies are progressing in several transformative ways:
- Enhanced Workflow and Management: Platforms like NVIDIA’s CloudXR optimize XR workflows by using edge computing for high-quality, real-time collaboration across devices. AI automates XR content pipelines by interpreting inputs like sketches and optimizing Three-Dimensional (3D) models, simplifying creation and content management. Additionally, photorealistic rendering is becoming essential to XR applications in retail. In realistic virtual environments, AI supports automation, content creation, and network balancing to deliver seamless, interactive experiences.
- AI in XR Headsets: The integration of AI within XR headsets is advancing the precision and fluidity of user interactions. Enhanced gesture recognition, voice control, and eye-tracking now respond in real time to inputs. This provides seamless, immersive shopping experiences in VR and AR. These technical advancements offer intuitive controls that allow users to interact in virtual environments more naturally and responsively.
- Virtual Products and Personalized Shopping: XR redefines shopping experiences by allowing users to try products virtually. Advanced AR algorithms analyze customer details like body measurements, skin tone, and style preferences to create accurate virtual try-ons. By helping consumers preview products with realistic scale and color matching, it is less likely that a customer will return a product after purchase. To make the shopping experience even more tailored, AI analyzes browsing patterns and purchase history to recommend products that match consumer preferences. By tailoring the shopping journey, retailers improve customer engagement and potentially increase click-through rates. As an example, AI has demonstrated the ability to predict a person’s pregnancy before they themselves are aware, simply by analyzing their regular shopping habits. AI compares these patterns to those of other pregnant individuals, enabling the algorithms to identify similarities and deliver tailored product recommendations, often before the person even suspects they might be expecting.
Real-World Applications
Some of the biggest retail brands in the world are successfully integrating AI and XR in various ways to enhance customer engagement.
Here are a few examples.
Sephora’s Virtual Artist App
Sephora has pioneered XR in the beauty industry with its Virtual Artist app. It allows users to virtually try on products using facial recognition and Machine Learning (ML). The mobile app scans the user’s face to render accurate overlays of makeup such as foundation and lipstick. Sephora’s Virtual Artist provides a realistic preview of how each product would appear in real life, minimizing the number of disappointed customers.
Shopify’s AI-Enhanced Shopping Recommendations
Shopify uses AI to deliver personalized shopping experiences by analyzing customer data and behavior. The platform tracks browsing history, purchase patterns, and preferences to suggest relevant products in real time. When combined with XR, these insights allow customers to view and interact with products in an immersive, virtual environment tailored to their tastes. Embedding AI into XR technologies empowers Shopify to increase conversion rates, as users receive product suggestions aligned with their needs and preferences. However, this technology requires customer consent to access behavioral data, which can cause friction. Companies like Trivver and Niantic are also experimenting with AI-driven XR to enhance personalized shopping experiences.
UNIQLO’s AI-Powered Interactive Displays
Japanese casual wear designer UNIQLO shows the retail industry how AI and XR can be used to enrich in-store experiences. To recommend clothing options, UNIQLO’s interactive displays analyze customer demographics and external factors, such as weather conditions. These displays make real-time outfit suggestions, enriching the shopping experience and potentially increasing impulse purchases.
XR Was Only the Beginning
XR adoption was just the first step to revolutionizing online and in-store shopping experiences. To create the most engaging and personalized experiences possible, AI must be integrated into retail XR applications. AI and ML models can be fed countless customer data points, taking into account security and privacy concerns, to understand what individual consumers truly want and the tactics that convert. That way, AR/VR users are presented with the right content in the right place at the right time.
Retailers who embrace this shift will not only meet the growing demand for personalized experiences, but will also differentiate themselves in an intensely competitive marketplace. An immersive, XR-fueled shopping journey that closely aligns with one’s unique preferences will generate a positive brand perception and increase Repeat Purchase Rates (RPRs).
Learn more about the latest XR technological developments and use cases by reading our Analyst Insights.
About the Author
Matilda Beinat, Research Analyst
Matilda Beinat is a Research Analyst within ABI Research's Strategic Technologies group, with a focus on Augmented Reality (AR) and Virtual Reality (VR). Coverage includes devices, content, platforms, and use cases across consumer and enterprise applications.
