Online shopping has made purchasing and returning clothing easy for consumers. But for retailers, returns have become a costly problem: The process requires retailers to pay to take back any garment that doesn’t fit before inspecting it and deciding what to do with it, often at a loss. Virtual testing powered by generative artificial intelligence is emerging as the most commercially viable solution.
Platform companies, retailers, and a growing number of startups are incorporating generative AI virtual try-on technology directly into product pages, search results, and checkout flows.
According to the US National Retail Federation, 15.8% of annual retail sales will be returned in 2025, totaling $849.9 billion, CNBC reported.
For online sales, that figure rose to 19.3%, according to the same NRF data cited by CNBC. Generation Z shoppers ages 18 to 30 averaged nearly eight online returns per person last year, the NRF found.
Profits directly eat into margins
Uncertainty about fit is the main driver of both returns and abandoned shopping carts, Ed Voyce, founder and CEO of artificial intelligence startup Catches, told CNBC. Most returned items never make it back on shelves, and it often costs retailers more to process them than the value of the refund. NRF data shows that 82% of consumers consider free returns essential, but the cost of providing them is becoming unsustainable for many brands, according to CNBC.
Simeon Siegel, a senior managing director at Guggenheim, told CNBC that proactively minimizing returns can be an important driver of profitability. Siegel noted that AI-generated images can now be delivered to consumers in the cloud at a price cheap enough for brands to generate a return on investment.
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Early virtual try-on attempts, which began in the 2010s, relied on static image overlays that couldn’t simulate how a garment fits different body types. Researchers at the University of Illinois Urbana-Champaign have developed a video dissemination framework called Dress&Dance that produces high-resolution video clips of users modeling selected clothing items.
The model processes photographs of clothing in real-world conditions, whether hanging on a rack or worn by another person, without the need for studio-calibrated images, according to the university. A follow-up model, Virtual Tester Room, generates arbitrarily long test videos with user-controlled multi-element layers, the university said.
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Retailers Incorporate Testing
Catches has developed a platform that he describes as offering mirror-like realism, building a digital twin from a user photograph, and incorporating the physics of fabric texture and how the material interacts with a moving body. The app was published in March on luxury brand Amiri’s website. Catches projects that the platform can generate a 10% increase in conversions and a 20 to 30 times return on investment for brand partners, figures provided by the company itself according to CNBC.
Google expanded its AI virtual try-on feature to Australia, Canada and Japan in October and added the shoe try-on feature to the existing apparel capability. The feature also allows users to try on the shoes virtually. Google also separately launched Doppl, which helps consumers use AI to visualize outfits by dropping an image or screenshot.
Perplexity launched its own virtual try-on tool in November for Pro and Max subscribers, generating results in less than a minute and taking into account posture, body shape and fabric drape.
Shopify has integrated startup Genlook’s AI virtual try-on app into its commerce platform, which the company says eliminates sizing questions and drives higher conversion rates.
Retailers are also incorporating these tools into their sites. For example, Zara launched a virtual try-on tool in December along with return fees for online orders, a combination that helped protect its gross margin and reduce bracketing, the practice of ordering multiple sizes with the intention of returning most of them.
ASOS recently reported a 160 basis point reduction in its return rate, partly due to experimentation with virtual try-ons in partnership with deep tech startup AIUTA.
The technology is still being refined and no platform has released a definitive return rate reduction tied solely to virtual testing. But the leadership of Google, Perplexity, Shopify, Zara and ASOS points to an industry that has decided the experiment is worth doing at scale.
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