Despite all the noise direct-to-consumer brands receive these days, there are still plenty of pain points, like returns, for them—and for legacy retailers.
But this year, it looks like returns are now the highlight of innovation (and investor money). Happy Returns, a startup that enables returns for online retailers in places like malls and stores, just raised $11 million, led by PayPal Ventures. Happy Returns has now raised a total of $25 million.
“Consumer expectations are changing, and the bar for returns is really being raised,” said David Sobie, CEO of Happy Returns. “It gives us a chance to accelerate hiring. From a product perspective, this will allow us to expand the types of offerings that we can provide for retailers.”
Sobie said talks originally began with PayPal last summer, when the payments giant took an interest in returns, since the company hears a lot about it from merchants who use PayPal. Happy Returns, unlike other players in the space, enables customers to return online items at kiosks in malls, college campuses as well as in other retailers like Paper Source. In addition to hiring more in the sales and marketing department, Sobie said he wants to start moving forward in bringing Happy Returns to the international market, as well as grow its U.S. network of return bars to 1,000 by the end of the year. Happy Returns currently exists in 63 metro areas, with 40 in the Los Angeles area alone.
It’s not just all returns at Happy Returns either. Sobie said as a learning from retailers and customers, Happy Returns introduced the ability to let customers exchange items in 2018. Sobie said enabling exchanges results in a win-win for everyone; the customer gets the item in whatever size or style they wanted, while the retailer keeps the sale—and keeps return costs low. As it stands now, retailers pay a service fee to receive access to Happy Returns’ software and network, as well as a per-fee item for shipping products back to a retailer.
“What we’re able to do is cheaper than the cost of returns by mail,” Sobie said. “By aggregating items together, refunding the customer at drop off, we’re able to reduce the cost for retailers.”
Happy Returns is part of the growing network of logistics companies attempting to solve the costly effect of returns. Narvar, a customer experience company, recently announced Narvar Concierge, which lets customers buy online and pick up in-store from a variety of brands at 8,000 Walgreens locations and three Nordstrom Local stores and four Nordstrom stores in California. Last week, Kohl’s also unveiled that beginning in July, all Kohl’s store will accept Amazon returns. It’s an expansion from Kohl’s and Amazon’s partnership around returns that originally began in 2017.
Sobie said Happy Returns functions more on the level of an Amazon and Kohl’s relationship, as opposed to Narvar’s partnerships. With Narvar, he said, customers still need to print a label, get a box and then return the item, as opposed to Happy Returns handling it all.
“Consumers expect more but they expect retailers to foot the bill,” Sobie said. “We’re tackling the cost for retailers.”