Online sales reached $1 trillion last year, and of that $218 billion worth of merchandise returned, according to the National Retail Federation. What’s more, for every $1 billion in items sold, retailers receive more than $160 million in returns.
We’ve seen companies get creative — for example Amazon partners with Kohl’s for returns in 2019 and Happy Returns partners with retailers such as Staples last year. The “boom of online shopping” led to more returns as consumers “become accustomed to ordering multiple sizes, colors, or variations of a product to try out at their leisure, then returning what they don’t want,” Rick Berger , president of NewStore, told ukbusinessupdates.com. The platform allows retailers to run their stores on the iPhone. In addition, “customers have also been conditioned by the ecommerce giants to expect a quick, easy and free returns process, no matter who the seller is.”
Those new habits have made returns a major expense for retailers. As they work to make it easier for customers to return merchandise, startups like ReturnLogicsay that the underlying problem is actually operational shortcomings in the returns process.
The Philadelphia-based company provides returns management software for e-commerce brands and retailers, bringing technology including customer relationship management, third-party logistics, inventory management and shipping all under one umbrella. Users can connect ReturnLogic’s APIs and access data that they can use to make product, process, production, and procurement changes to improve their bottom line and satisfy customers.
Company founder and CEO Peter Sobotta founded ReturnLogic in 2015 after a long career in reverse logistics. He started to pay attention to the new generation of modern e-commerce companies that emerged in the last five years. What struck him was that they had “relentless focus on data and lifetime value, but they just couldn’t get that,” he said.
“We saw a nice wave of COVID, everyone did it, the tsunami wave hit,” Sobotta added. “The trends we’re seeing now are that retailers are taking returns much more seriously. Because when it comes to investment, dollar for dollar, if you now have a place to park money and you’re trying to cut costs, but you have a return of 30% to 40% like most clothing companies, you invest $1 in returns go straight to the bottom line.”
Over the past seven years, ReturnLogic has processed more than half a billion returns and has grown into hundreds of online brands and retailers, including Groove Life, EchelonFit, Oofos, Decathalon, Dossier and The Sak. It also handles third-party warranty returns for major retailers, including Amazon, Walmart, and Best Buy.
Now it is ready to expand and has received $8.5 million in Series A funding from an investor group led by Mercury, with participation from Revolution’s Rise of the Rest Fund, White Rose Ventures and Ben Franklin Technology Partners. The new capital gives ReturnLogic a total of $11.5 million in equity.
Blair Garrou, president of Mercury, told ukbusinessupdates.com that much of the returns software is still early and focuses on allowing customers to exchange products rather than other means of return, such as if there is a warranty issue or some other reason.
“Young direct-to-consumer brands don’t really know when they’ve hit this operational inefficiencies with returns, until they hit $40 million, $50 million, or $100 million in revenue,” he said. “It was only when I spoke to Peter, with his background, that it really became clear to us and it made sense. Capacity planning and understanding your long-term value to customers is something the market is more or less maturing into. Peter’s team has its finger on the pulse there.”
While the returns industry is still on the rise, Garrou says there are many companies concentrating their efforts here. ReturnLogic also joins other companies, including Seel, Loveseat, FloorFound, and Loop Returns, to address returns. Some, like saarawho have raised $1 million so far are trying to do it in a more environmentally friendly way.
Gaurav Saran, CEO of ReverseLogixa cloud-based returns platform that raised $20 million last year told ukbusinessupdates.com that spreadsheets and manual processes are no longer limiting it for returns management.
“This is why there is increasing investment in technical upgrades in this part of the supply chain,” Saran said. “While returns are often overlooked in relation to supply chain issues, optimizing them will have a disproportionate impact, from efficient returns and repairs to sustainability goals, labor management and even new revenue opportunities. Therefore, I believe that a returns management system will become its own solution category within the supply chain.”
Indeed, IBISWorld estimates the US Product Return Management Market is valued at $10 billion this year.
Meanwhile, ReturnLogic has hired seven new people in the past, and Sobotta says there are plans to use the new capital to expand its workforce from 35 to 50 by the end of the year, especially in product development. In addition, the company will expand its API offering and lean in its sales model.
The company is partnering with Shopify, but plans to expand to other platforms, Sobotta said.
“Our vision is to be the operating system of returns on every platform and workflow, which is what makes us so special because that’s incredibly hard to do,” he added. “A big step for us this year is to demonstrate that for the markets we serve, we are opening additional platforms and a broader base, leading to our growth potential.”
