PurposeThis study aims to test the impact of avatars on consumer psychological states, engagement, and purchase intention in the online retail environment with reference to the Regulatory Engagement Theory.Design/methodology/approachOne-factor between-subject experimental design was used to test research hypotheses. Two versions of an experimental merchant website have been designed for the purpose of the study: with and without the avatar. Participants were randomly assigned to experimental conditions and responded to an online questionnaire displayed during the visit. SEM analyses with AMOS 24 and SPSS Macro Conditional Process Analysis for bootstrapping were used to test the hypotheses.FindingsThe results confirm the avatar’s positive impact on perceived enjoyment and immersion, both positively affect consumer engagement and purchase intention. The mediating role of psychological states in the impact of avatars on consumer engagement is also confirmed.Originality/valueThis study advances the interactive marketing literature by focusing on avatars as an emerging interactive technology in the virtual retail context. Unlike previous studies on virtual agents, which primarily focused on their utilitarian role in online customer support, this study investigates how avatars influence consumers' psychological states, engagement, and purchase intention.