How AI is trying to solve retail’s returns problem
How AI is trying to solve retail’s returns problem
https://www.cnbc.com/2026/04/05/ai-retail-start-ups-virtual-try-on-tech-margins.html
Publish Date: 2026-04-05 08:37:00
Source Domain: www.cnbc.com
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Rise in Product Returns: Fashion retailers face significant losses due to the rising rate of product returns, estimated at $849.9 billion for annual retail sales in 2025, with 15.8% returned online.
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Role of AI in Reducing Returns: Artificial intelligence startups are developing virtual try-on technologies to help customers visualize fit and style before purchasing, thus reducing the chances of returns and improving profitability.
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AI Innovations: Companies like Catches are incorporating realistic physics to simulate how fabrics behave, aiming to provide a more accurate virtual try-on experience, thus potentially reducing return rates.
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Impact on Fashion Retail Giants: Retailers like Zara, ASOS, and Shopify have implemented or experimented with virtual try-on tools to tackle return issues. Zara has introduced return fees to combat margin erosion, a strategy also supported by improved virtual try-on solutions.
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Influence of Gen Z Shoppers: The trend of high online returns is largely driven by Gen Z consumers, who have an average of nearly eight online returns per person annually.
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Evolving Technology and Challenges: While AI solutions can significantly reduce returns, they are not a complete fix and must be complemented by traditional retail practices and policies to maximize ROI.
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Role of Tech Companies: Tech giants like Amazon, Adobe, and Google are also developing virtual try-on technology and working with fashion brands to integrate their solutions into e-commerce platforms.
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Future Impact: The use of AI in virtual try-ons can lead to substantial reductions in returns and improve conversion rates, as demonstrated by successful AI startup models, but the overall effectiveness can vary among different brands.
