The Problem
Online returns are a multibillion-dollar problem for the industry that's eating directly into companies' margins. The U.S. National Retail Federation late last year estimated that 15.8% of annual retail sales were returned in 2025, totaling $849.9 billion. For online sales, that number jumped to 19.3%. Gen Z is driving this trend, with shoppers aged 18 to 30 averaging nearly eight online returns per person last year. Most returned items never make it back to the shelves and often cost the retailer more to process than the value of the refund itself.
The Solution
A growing number of AI start-ups have emerged to provide virtual try-on technology, allowing potential customers to visualize fit and style before they buy. Catches projects that its app can drive a 10% increase in conversions and a 20- to 30-times return on investment for brand partners. It focuses on luxury brands because of their higher price point.
Market Adoption
Tech giants like Amazon, Adobe, and Google have also created virtual try-ons in various shapes and forms, partnering with major brands to roll out the technology. From April 30, Google's virtual try-on tech can be accessed directly within product search results across Google platforms.
My Take: This is a genuine margin-saving technology that retailers will adopt quickly. The ROI math is compelling. What's interesting is that early movers like Zara are combining virtual try-ons with return fees to create a hybrid approach. The tech won't solve everything, but it will measurably reduce return rates.