The Rise of AI Virtual Try-On Technology in Retail

Fashion retailers are increasingly adopting artificial intelligence (AI) to tackle the significant issue of product returns, which the U.S. National Retail Federation (NRF) has identified as a "silent killer" of profitability. In 2025, an estimated 15.8% of annual retail sales, amounting to $849.9 billion, were returned, with online sales seeing a higher return rate of 19.3%. This trend is particularly pronounced among Gen Z consumers, who averaged nearly eight online returns per person last year. The costs associated with processing returns often exceed the value of the refunded items, creating a multibillion-dollar problem for the industry.

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A growing number of AI startups are developing virtual try-on technologies to help consumers visualize fit and style before making a purchase. One such startup, Catches, allows users to create a "digital twin" for a more realistic virtual fitting experience. Ed Voyce, the founder and CEO of Catches, emphasizes that the primary reason for returns is uncertainty over fit. The platform, which recently launched on luxury brand Amiri's website, incorporates the physics of fabric texture and movement, aiming to bridge the gap between online shopping and in-person experiences.

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Retailers are implementing various strategies to mitigate the impact of returns on their margins. For instance, Zara, owned by Inditex, has introduced return fees for online orders, a move that has sparked controversy but has helped protect its gross margin. The company also launched its own virtual try-on tool in December. Similarly, ASOS has reported improved profitability, partly due to a 160 basis point reduction in its returns rate, achieved through partnerships with AI startups like AIUTA to offer virtual try-ons that cater to diverse body types.

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Tech giants such as Amazon, Adobe, and Google are also entering the virtual try-on space, with Google set to launch its technology for luxury brands on April 30. Shopify has integrated Genlook's AI virtual try-on app into its platform, aiming to enhance buyer confidence and reduce costly returns.

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Ed Voyce stated, "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." He believes that the current technological advancements allow for cost-effective visualizations that can significantly impact the retail industry.

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Despite the potential benefits, some critics argue that virtual try-on technologies may not fully replicate the in-store experience. Concerns remain about whether these tools can adequately address the complexities of fit and fabric interaction, which are often best assessed in person.

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As retailers continue to experiment with AI-driven solutions, the industry anticipates substantial reductions in return rates. While specific figures remain unquantified, the potential for these technologies to reshape consumer expectations and purchasing behavior is significant. The ongoing development of virtual try-on applications is expected to play a crucial role in the future of retail, especially as brands seek to balance customer satisfaction with profitability.

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