Apparel and fast-fashion brands such as Perry Ellis and H&M are turning to a new weapon in the fight against costly online returns: artificial intelligence. They are using AI to sharpen product descriptions and recommendations, steer certain ads away from shoppers most likely to return those products, and aim advertising toward consumers they believe will hold on to their purchases.
Returns are a blight to online retailers: They need to make the process smooth enough to encourage sales, but prevent the cost of returns from swamping their balance sheets.
Return-processing costs as a percentage of overall sales in 2022 held roughly even from the year before at 16.5%, according to the National Retail Federation. But the problem has grown more pressing as inflation crimps both consumers’ wallets and retailers’ bottom lines.
Some companies have responded with strictly analog solutions. Online retailer Dress the Population, for example, gives discounts to people who agree not to return their purchases.
Thirty-five percent of retailers have begun charging for returns over the past year, according to a September survey of 500 U.S. retail executives by goTRG, which provides returns software and management services. Twenty-nine percent have shortened their return windows and 17% have begun offering store credit instead of refunds during that time period, goTRG said.
