E-commerce is turning to technology to reduce merchandise returns
Shoppers spent over $1 trillion online in the U.S. in 2021.1 However, while retailers’ generous return policies make online purchasing more comfortable for people, they also create huge costs for retailers. The National Retail Federation reported over $200 billion in returned merchandise in 2021, or 20% of total online sales.2 That figure doesn’t include the cost of processing returns, which can include shipping, sorting, re-packaging, or destroying items.
While in-person shopping saw a slight resurgence in 2021, a number of brick and mortar stores have permanently closed since 2020. This has pushed more consumers to purchase items online that they might have previously purchased only in-store, like clothing, shoes, and cosmetics. However, without being able to try items on, there’s a greater chance they’ll be returned, pushing retailers to look for ways to reduce the number of returns through virtual experiences.
Snap, Inc., the company behind Snapchat, has become a major player in augmented reality (AR) shopping. The company has invested in virtual try-on technology for shoes and apparel, forming partnerships with brands like Prada and Farfetch. Snapchat’s apparel try-on tool can not only model an item on the user’s body using a phone’s front-facing camera, it can also find items to try using voice commands. Technologies include 3D Body Mesh and cloth simulation provide a realistic representation of clothing on the user’s image.3 Snap reports over 250 million users have interacted with their AR shopping lenses between January 2021 and April 2022.4
Other social media companies are also adopting AR shopping technology as part of a shift to social commerce. Accenture predicts social commerce—purchasing via social media platforms instead of traditional retailers—will grow three times faster than traditional e-commerce over the next three years.5 YouTube added an AR Beauty Try-on feature for makeup in 2019. Initially, the feature was used with make-up tutorial videos to allow viewers to try different colors of a product used in the video. The feature has since been expanded to create interactive ad campaigns. Instagram has also partnered with L’Oreal to provide similar AR-based try-on technology for several of the conglomerate’s cosmetic brands that can be purchased through the Instagram app.
Virtual try-on technology isn’t just being used for social commerce. Earlier this year, Walmart launched “Be Your Own Model,” allowing customers to use their own photos in the store’s app to see what clothing looks like on them.6 JC Penney, which closed 175 of their retail stores since 2020,7 has partnered with technology company Revieve for AI-driven skincare advice and AR makeup try-ons to adopt more digital shopping solutions.
Cosmetics brands and retailers have been AR shopping pioneers, becoming some of the first to adopt virtual try-on technologies. L’Oreal bought AR company ModiFace in 2018 to enable online experimentation by customers. Ulta Beauty acquired startup GlamST in 2018 to create their GLAMLab offering, which uses AR and machine learning for a realistic make-up try-on experience that moves with the user. Main competitor Sephora built a virtual artist into their app that combines a virtual try-on experience with social media sharing and side-by-side comparisons to aid purchasing decisions. As cosmetics returns cannot be resold, unlike clothing or shoes, using AR to reduce returns can have a significant impact on the bottom line.
Despite the number of companies investing in AR shopping, only 13% of US adults having tried it.8 However, AR shopping demonstrates potential for cost reductions, with Shopify reporting a 40% decrease in returns among customers who used 3D visualization.9 In addition, virtual try-on technologies can be used to upsell additional items, such as coordinating clothing or accessories. Expect to see more retailers adopt these technologies as they mature.
- National Retail Federation, Retail Returns Increased to $761 Billion in 2021 as a Result of Overall Sales Growth, January 2022
- Ibid.
- Vogue Business, Snapchat boosts AR try-on tools: Farfetch, Prada dive in, May 2021
- VR Scout, Snapchat’s New AR Shopping Tools Are A Game-Changer, May 2022
- Accenture, The future of shopping and social commerce, January 2022
- Walmart Press Release, Walmart Levels Up Virtual Try-On for Apparel With Be Your Own Model Experience, September 2022
- JCPenney, JCPenney Store Closings, accessed November 2022
- Insider Intelligence, AR/VR shopping still hasn’t reached 90% of US adults, November 2022
- Newsweek, Augmented Reality Shakes Up Retail with Digital Makeup and Fashion, March 2022
