Ever send a dress back a week later after buying it online? Your click is just a small part of a much bigger tale that is changing the way fashion brands conduct business. You are not alone. By 2026, product returns will be a multi-billion-dollar problem, not a minor nuisance, prompting Indian and global fashion producers to rethink everything from sizing to sustainability. Here is a look at why returns are eating into profits and how some of the savviest companies are fighting back, thanks to the latest tech and some smart thinking.
Become future-ready with our Fashion Programs
Know More
Returns may seem like a customer-friendly feature on the surface, but for marketers they are a complicated financial problem. Returns rates for online fashion in India are between 25% and 40% and in some premium categories, even higher. Returns cost brands more than just shipping fees. There are costs for returns processing, handling, and often for devalued products. Often a garment is reduced or un-saleable, then shipped out repackaged, lowering profit even more.
- Poor fit - McKinsey's State of Fashion research estimates that 70% of fashion returns are due to items not fitting properly. The issue worsens because no two brands have the same size.
- Bracketing culture - Many buyers are increasingly “bracketing,” buying different sizes or colors of the same item and keeping only what fits. It’s helping clients find their perfect fit, but it is also adding to shipping and return costs for brands. About 40 percent to 48 percent of internet customers said they ordered various sizes or colors before returning, according to market statistics.
- Products do not meet expectations - Sometimes products do not show up or feel as they did in internet pictures. That disappointment means a hasty comeback.
- Poor quality or damage - This is a popular reason to return things if they are defective or damaged, be it a production issue, packaging issue, or transit disaster.
You might be surprised to learn that some of the most loyal customers are also the most common returners, the "serial returners." “Gen Z considers easy refunds a fundamental right and taking it away from them can be counterproductive. The real trick for brands? Keep these valued consumers happy but is it prudent to control the costs? Now, stores look at the rate of refunds, not the number of items returned. No cash refunds, just exchanges and shop credits. This keeps the money in the business.
With the increasing need for accessibility and customers asking for more choices, the product returns are still a giant difficulty for e-commerce firms and fashion labels are adopting the following technologies and techniques to fight the challenge today.
- AI-Powered Size Recommendations - Forget “guess and hope” sizing; a new wave of digital innovation powered by AI is here. Myntra, Amazon, and other sites are leveraging AI in analyzing the purchase history and body types to suggest the best fit for every shopper.
- Virtual try-on & digital avatars - Brands are introducing technologies that let you “try on” clothing virtually and even see how glasses look on your face, so it’s easier to get it correctly the first time.
- Predictive analytics - Brands can evaluate client data to recognize patterns and trends, enabling them to provide more personalized recommendations and reduce returns.
- Exchange first policies - Many companies are now pushing exchanges (especially for sizing problems) rather than free cash refunds, keeping the money in the firm.
- Peer-to-peer returns - Some stores are delivering returns straight to the next customer, avoiding warehouses and saving expenses and emissions. With each transaction you can save a lot of euros and hundreds of grams of CO₂.
- AI-Powered Fraud Detection - Brands can apply artificial intelligence algorithms to evaluate historical consumer behavior and return patterns to help flag questionable activity. Brands can also inspect products throughout the returns process using computer vision technologies to detect any abnormalities or irregularities that may suggest fraudulent returns.
- Regulatory Changes - Free returns will be a thing of the past. With the EU implementing strict new regulations regarding packaging waste and the destruction of textiles in 2026, brands are being forced to become serious about sustainability or pay big fines and suffer public outrage. Smart logistics, AI-powered fraud detection, and imaginative refund tactics are no longer a choice; they are a must-have.
![Student Guidance Center: Our Counselors are Just a Click Away.]( "Student Guidance Center: Our Counselors are Just a Click Away.")
Student Guidance Center: Our Counselors are Just a Click Away.
When you return an item next, bear in mind that you are setting in motion a symphony of tech, data, and business strategy behind the scenes. Brands that tackle this dilemma head-on, by leveraging AI wisely, delivering true transparency, and rethinking their return processes, are converting a profit-killing problem into a competitive benefit.
Dr. Ritu Jain, Professor at Pearl Academy and a doctorate in Management (Marketing), has over two decades of experience across retail, academia and research. Her industry experience with BigJo’s Department Store, The Home Store and E. Breuninger GmbH spans merchandising, buying, category management and consumer analytics. Her research focuses on sustainable consumption, consumer behaviour and fashion renting, with publications in ABDC- and Scopus-indexed journals, including the Journal of Business Research and Journal of Consumer Behaviour.
