AI-Driven Virtual Try-On Tech Aims to Tackle Retail's Costly Returns Problem

A growing number of AI start-ups are revolutionizing the retail industry with virtual try-on technology, aiming to reduce the multibillion-dollar problem of online returns. These advancements in AI allow potential customers to visualize fit and style before making a purchase, significantly lowering the chances of returns.

Virtual Try-On: The Future of Online Shopping?

Online returns cost the retail industry billions of dollars annually, eating into companies' margins. According to the U.S. National Retail Federation, 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 shoppers, aged 18 to 30, averaged nearly eight online returns per person last year, driving this trend.

Ed Voyce, founder and CEO of AI startup Catches, tells CNBC, 'The primary reason for returns and abandoned shopping carts is uncertainty over fit.' Catches has developed a platform that allows users to create a 'digital twin' to try on clothes virtually with what it calls 'mirror-like realism.' This application went live last month on luxury brand Amiri's website for a select range of clothes.

Technological Advancements Drive Solutions

The rapid development of generative AI has made these applications good enough to meaningfully impact retailers' bottom lines. Unlike other models, Catches' platform incorporates the physics of fabric texture and how material interacts with a moving body, providing a more realistic experience.

'The reason we built Catches was to take advantage of a kind of confluence of technologies that is taking place right now to solve this issue effectively,' says Voyce. The platform runs visuals for end users on bare metal in the cloud, cheaply enough to make a return on investment for brands.

Industry Impact and Future Outlook

While fit technology will never be as good as trying something on in person, it bridges the gap and continues to improve. Guggenheim Senior Managing Director Simeon Siegel notes, 'It's going to continue to get better, I think that's going to continue to reduce returns.'

These AI tools not only aim to reduce returns but also enhance purchases. As e-commerce continues to grow, the integration of virtual try-on technology promises to transform the retail landscape, offering a more seamless and satisfying shopping experience for consumers while protecting the margins of retailers.

References

• Silent killers: How AI start-ups are trying to solve one of the retail industry's biggest problems