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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It pinches here; drags there; the draping is wrong. These are some of the examples of the feedback a new crop of artificial intelligence apps might give a prospective customer trying on clothing ahead of a purchase, and in the process reduce the chances of a product being returned to a store.
Fashion retailers are increasingly turning to AI to solve the issue of rising product returns, a persistent drag on profitability and something many in the industry refer to as the industry’s “silent killer”.
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.
While tech companies have attempted to solve online fit issues since the 2010’s, the rapid development of generative AI has finally made these applications good enough to meaningfully impact retailers’ bottom lines.
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, the NRF found.
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. It’s a multibillion-dollar problem for the industry that’s eating directly into companies’ margins.
“Figuring out how to proactively use returns and then how to minimize them can be a meaningful driver of business and profitability,” Guggenheim Senior Managing Director Simeon Siegel told CNBC.
While fit technology will never be as good as trying something on in person, it’s a great way to bridge the gap, Siegel said. “It’s going to continue to get better, I think that’s going to continue to reduce returns.”
Mirror-like realism?
The primary reason for returns and abandoned shopping carts is uncertainty over fit, Ed Voyce,…
