Retail’s ‘silent killer’: AI startups take aim at the costly returns epidemic

Retailers are enlisting a new wave of AI tools to curb a mounting profit drain: product returns. Startups like Catches say better virtual try-ons—now powered by cheaper cloud compute and more realistic physics of fabrics—can meaningfully cut fit-related returns while lifting conversions. The economic stakes are large: the National Retail Federation estimates roughly 16% of U.S. sales were returned in 2025, with online return rates near 19%, driven disproportionately by Gen Z. Big brands are mixing technology and policy—Zara’s return fees, ASOS’s body-diverse previews, Shopify’s Genlook integration—while tech giants from Google to Amazon roll out try-on features. Analysts see AI reducing uncertainty and protecting margins but caution it’s no cure-all; retailers are also leaning on AI for inventory, customer targeting, and fraud. The race is on to balance consumer expectations for easy returns with the rising costs of fulfillment and reverse logistics.

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