New research from Infinite Reality examined how retail is rapidly changing with Gen Z leading the way in regard to how consumers live, work, play and shop.

However, many retailers and brands are failing to meet the demands of today’s Gen Z shopper. Citing data from Shopify, authors of the report, titled “Retail’s Next Frontier: Immersive Experiences Will Transform E-commerce,” said the current e-commerce system is failing both brands and consumers. The report noted that online conversion rates average 2.5 to 3 percent, which is below the 20 to 40 percent rate of physical stores. Moreover, nearly 18 percent of items purchased online were returned in 2023. That’s about $247 billion in returns.

That’s a problem.

In response, the report’s authors say retailers and brands need to engage Gen Z with the technologies these digital natives are embracing, which means offering more immersive shopping experiences. The authors of the report said consumers are ready for it, with 66 percent of respondents saying they would feel comfortable using an immersive shopping experience “where they could virtually interact with products.” This rate increases for younger consumers (72 percent) and gamers (80 percent).

Younger consumers are driving most of the change in retail. “In-game shopping in Roblox, Fortnite and other virtual venues have gone from novelty to commonplace,” the report noted. “Amazon, MasterCard and others are rolling out AI-powered shopping services. Brands like Amazon, Ralph Lauren, Sam’s Club and dozens of others are experimenting with 3D websites.”

The report stated that this shift aligns with Gen Z’s “distinct shopping habits, shaped by their upbringing with video games.” Over the next few years, the report’s authors said younger Gen Z customers will “shop online more frequently and have higher expectations for both in-person and digital shopping experiences. They are also more comfortable shopping for digital goods, using new forms of payments like digital wallets, and even with alternative currencies such as cryptocurrencies.”

Leveraging immersive technologies could also unlock one category that struggles with returns and other issues: fashion apparel. “Users can’t try on clothing online,” the report stated. “This presents an opportunity for retailers using mixed reality products such as virtual fitting rooms and interactive product displays to increase sales.”

The report’s authors said the typical apparel customer tends to mostly buy for themselves and found that nearly all those polled “have made online apparel purchases in the past and nearly 70 percent report intent to buy something in their journey.”

But shoppers also want leisurely shopping journeys. “They want to examine options from multiple retailers,” the report’s authors explained. “Shopping journeys may last from a single day to nearly a week. However, online apparel purchases leave respondents the least satisfied of any of the verticals we looked at. Dissatisfaction is highest for the latter part of the funnel: payment, delivery and the product itself.”

For its part, Infinite Reality found that 55 percent of those polled found the company’s immersive online shopping experience appealing. “Designed for enhancing the online purchase journey, this number increases to 62 percent for younger consumers and 69 percent for gamers.”

The Infinite Reality report and survey were conducted in 2024 and was based on 2,500 consumers. Aside from apparel, the researchers also looked at consumer sentiment in home goods, furniture, beauty and wellness, electronics and food and beverage.