When AI Meets Margin Pressure
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%.
For years, AI companies have chased buzz-generating demos. But here's something different: A growing number of AI startups 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.
Catches projects that its app can drive a 10% increase in conversions and a 20- to 30-times return on investment for brand partners. It focuses on luxury brands because of their higher price point. The startup hasn't yet put a number on how much returns might decline with the use of its platform, but targets 'massive reductions.'
Why this matters: This is AI finally solving a real, measurable, billion-dollar problem. Not hype. Not a feature. An actual business case. Gen Z is driving this trend, with shoppers aged 18 to 30 averaging nearly eight online returns per person last year. That's unsustainable, and now it's fixable.