Fashion retailers are increasingly leveraging artificial intelligence (AI) to combat rising product return rates, estimated by the U.S. National Retail Federation to reach 15.8% of retail sales by 2025. Returns, particularly from online sales, pose significant profitability challenges, with many items costing more to process than their refunds. New AI startups, like Catches, provide advanced virtual try-on technologies, allowing customers to visualize fit accurately through “mirror-like realism.” Such tools aim to minimize returns and enhance purchasing confidence, particularly among Generation Z, who average nearly eight online returns annually. Retailers like Zara and ASOS are proactively implementing virtual fitting solutions and return fees to preserve margins. Despite the benefits of AI in improving customer experiences and boosting conversion rates, experts caution that it’s not a panacea and should complement broader strategies for inventory management and customer service. Emphasizing product appeal remains essential as retail evolves with AI innovations.
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