Retail is shifting from physical shopping experience to a more online experience. However, the transition is not happening without pains and both consumers and companies alike face challenges when it comes to utilizing all the benefits that the flexibility brings. One of the biggest issues that the online fashion industry is facing, is product evaluation and the resulting high returns rate. Customers are unable to fully evaluate the products due to, for example, insufficient information, faulty information and the fact that size guides are not reliable, which are incentives for the customers to send the products back. Thus, the aim of this thesis is to investigate and determine what the key challenges that the online fashion companies face related to their most common product evaluation tools and what effects those challenges have on the companies. Further, this thesis evaluates how implementing an augmented reality tool, the Augment app would affect those challenges. Finally, this study investigates how implementing the Augment app would affect the Swedish online fashion retailers’ competitiveness. To answer these questions, a qualitative multi-case study was conducted with three Swedish online fashion retailers. Conducting an embedded multi-case study allowed for meaningful and generalizable findings as it allowed for both within-case analysis as well as cross-case analysis. The results of the study found that companies face challenges in regards to providing quality customer service, ensuring e-satisfaction as well as reducing the high percentage of customer product returns for the Swedish online retailers. Further, the study found that the Augment app could not automatically solve all of the challenges on its own. Rather, the Augment app would act as a complement to the current product evaluation tools and be a most welcome addition. Further, by implementing it, a company could build sustainable competitive advantage.