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

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.