AI is transforming e-commerce by addressing the challenge of package returns, a major cost for retailers. Brands like Shein and Zalando are shortening return windows and implementing fees, moving away from previously free return policies. With around 30% of fashion purchases returned, AI tools, such as those from Fringuant, help customers find better sizes using selfies, reducing returns significantly. AI also enhances warehouse operations and fraud prevention, leading to a more efficient retail environment.
AI Innovations in E-Commerce: Reducing Package Returns
From basic selfies to advanced robotic systems, artificial intelligence (AI) is making waves in the online shopping industry. Retailers are increasingly adopting AI tools to tackle the issue of package returns, which can significantly harm their profit margins.
For instance, the popular fast-fashion retailer Shein has implemented a new return policy, shortening the return window from 45 days to just 30 days starting in 2024. Similarly, Zalando has also made a significant cut, reducing its return period from 100 days to 30 days.
This trend of tightening return policies was initiated by brands like H&M and Zara, which have begun charging a nominal fee for returns on items bought online. Once viewed as essential for a risk-free shopping experience, the free return policies that gained popularity in the early days of e-commerce are now being replaced by a more accountable approach, as noted by Laëtitia Lamari, an analyst focused on online retail.
The Impact of Returns on Fashion Retailers
The statistics paint a concerning picture: approximately 30% of fashion purchases are returned. A significant factor contributing to this is that customers often buy multiple sizes or styles, only to send back most of them. According to a McKinsey study, this return practice places a financial burden on online clothing retailers, with the average cost of a return ranging from $21 to $46, factoring in shipping, processing, and repackaging expenses.
AI is stepping in to help mitigate these issues. For example, in the online fashion segment, around 70% of returns stem from sizing discrepancies. Zoé Tournant, co-founder of the French startup Fringuant, has developed an AI tool that analyzes a customer’s body using just a selfie. By combining this data with information about the garment’s dimensions, the AI can recommend the best fit, resulting in a notable reduction in returns.
Fringuant’s clients, including well-known brands like Maje, report a 45% decrease in returns for items assessed with their AI tool. Moreover, Zalando is also leveraging AI to forecast customer measurements by having users take two photos in fitted clothing, which can significantly minimize returns.
AI isn’t just helping at the consumer level; it’s also revolutionizing warehouse operations. At ID Logistics, smart cameras attached to order pickers verify that the items being selected match the order specifications, drastically cutting down errors by 90%. Additionally, autonomous robots equipped with AI can efficiently manage stock levels, reducing the likelihood of mistakes that lead to returns.
In cases where returns do occur, AI plays a crucial role in verifying that the correct items have been sent back, helping retailers combat fraud effectively. The integration of AI technology into e-commerce processes is paving the way for a more efficient and cost-effective retail landscape.