The shipping industry is not short on new ideas about how to get things to people faster, cheaper and easier. Want a toothbrush and a burrito at your house in 15 minutes? That's almost certainly doable. And it's an increasingly competitive space.
Eric Wimer and Kristian Zak, the founders of Returnmates, are focused on the other end of the buying process: the returns. They're trying to build a system that is just as efficient and convenient (and almost as fast) for sending back the stuff you don't want after all. They're partnering with some big brands in the process, which are betting that by making returns easier, they might actually be able to make customers more comfortable shopping online in the first place.
Wimer and Zak joined the Source Code podcast to talk about the returns industry, why businesses are finally coming around to making returns easy, and how to build an efficient system to get people's unwanted clothes, gadgets, rugs and dollhouses back from whence they came.
You can hear our full conversation on the latest episode of the Source Code podcast, or by clicking on the player above. Below are excerpts from our conversation, edited for length and clarity.
You're a relatively new company, trying to do a relatively new thing. So let's just start at the beginning: Give me the mythological origin story of Returnmates.
Eric Wimer: Kristian and I have been really close friends out here in LA for the past three or four years. And during COVID, we were jamming on ideas, always kind of sitting around thinking about trends that were happening in the world. And I asked Kristian if he wanted to take a walk with me to the post office, because that's what you did during COVID, right? Fun during COVID was taking a walk to the post office.
So I went inside. I came out of the post office about 30 minutes later. And he just looked at me and said, "What were you doing in there?" And when I explained to him that I was sending back a shirt that I bought that didn't fit, he said, "That's exactly why I don't shop online." And this is one of those things that I've thought about 100 times, right? The return process is so frustrating. I'm a serial online shopper, I've got something outside my door every single day, I probably return a third of them. And it never occurred to me that there was this other type of person out there that was actually deterred from shopping online by returns and the whole process.
So that kind of just kicked off this conversation between the two of us. Kristian mentioned something around the lines of, "Why don't we just go pick up our friends' returns?" And that sparked the idea to just build out this initial network, and thoroughly test this concept of being able to do the entire thing from the comfort of your home.
Kristian, that's an awfully hard line against online shopping.
Kristian Zak: I don't want to put myself under the lazy bracket … but I know myself, and I know that I will buy something, and it will just sit there for weeks and weeks, and then I'll miss the deadline.
That's why this thing was just very exciting to us. It wasn't like one day, we just wanted to solve returns and reverse logistics. What was truly exciting to us was how the shopping experience would evolve as a result of fixing the pain of returns. It traces all the way through your entire purchase experience, from the second you add something to your cart, you're choosing between certain sizes, or wondering, "Am I going to love this dress?" And then you're checking the return policies: Do they pay for the return shipping? How many days do I have?
It's just constant doubt in your head when you're shopping online. If you completely remove that, it almost transforms the way people just shop online, it removes that friction. So that, to us, is the big pitch.
It's just constant doubt in your head when you're shopping online. If you completely remove that, it almost transforms the way people just shop.
The conspiracy theory part of my brain says that every company should hate you, because they don't want things to get returned. Me buying a vacuum on Amazon that I don't like but forgetting to return it within 60 days, and then buying another vacuum on Amazon, feels like a huge victory. Part of me feels like all these systems are difficult on purpose. Because if it were easy to return, that's a giant pain for all these companies. How right or wrong am I in that crazy assumption?
KZ: You're pretty spot on. However, I think recently there's been a shift. Five years ago, everyone was expected to pay for return shipping, that was kind of the norm. Over time, the expectations have gotten higher and higher. People are checking the return policy over 50% of the time, so it's top of mind for people. And we just think that, over time, the expectation is going to be as easy of a policy as possible. So it's in the brand's best interest to provide that. And there's a lot of supply chain things that we do internally that actually don't necessarily increase returns. It just makes it more efficient for the brand.
EW: We had the same assumption when we started the business. And it wasn't until we started talking to retailers, and really understanding the nature of their business, that we really recognized that not only is this an opportunity to delight customers in a really meaningful way, but there are a ton of supply chain efficiencies that can be realized by having a company like Returnmates just more directly integrated with your reverse logistics.
What we found was that a lot of these items aren't going back on the shelf, and the companies are paying to have them shipped back. In addition to that, you have consumers all over the place, dropping items off at post offices or UPS and those packages are getting sent back one by one. And so what we found is that by actually having someone grab the product from your doorstep and bring it back to a centralized location, we can actually put more items in fewer boxes and ship them back to the retailer. So that becomes incredibly powerful for us and the retailer from a cost standpoint. In addition to that, it's just better for the environment.
So at the end of the day, the consumer wins, because they get a white glove experience. The brand wins, because they're reducing their costs surrounding the returns. And then the environment wins. So in our mind, that's what we're kind of striving for, as we think about this business going forward is just really kind of servicing those three customers in a meaningful way.
So just walk me through the experience here. I buy, I don't know, a jacket that's way too big and looks stupid on me. And I say, I don't want it anymore. What happens next?
EW: So you go to our website, you fill out a little bit of information about the pickup address and the item that you would like returned. If you have a label for that item already, you can just drag it right into the form; we'll actually just print that for you. And then you choose your handoff method: You can either hand it to a Returnmate directly, or you can place it outside. Once you do that, you choose a pickup date as early as the next day.
Once you submit that form, we ingest that pickup into our system. And so everything gets optimized the night before. And then the morning of your pickup, you get a text message with a 30-minute window of when we're going to come by. Then you get notifications along the way. So if you decided you wanted to place something outside, you can actually just type it up so that it's a contactless pickup. You don't even need a box.
So let's say you're sending back a T-shirt, you uploaded the label on our site and you don't have any packing materials. You could simply place the shirt outside, a Returnmate will come pick that item up, you'll get a proof of pickup picture to your phone that shows that they picked it up successfully. And then we'll bring that item back to our warehouse, where we do all the packaging and get it prepared for shipment. So we'll affix the label, we'll tape up the box, we'll package it together, and then we'll get it to the right place. And then the icing on the cake for us, which we thought was something that was always missing throughout the returns experience, is just sending you your tracking information, making sure that you can just follow up on where that item is and have that sense of security, that it's getting back to the right place.
Do people care about that? I sort of feel like when you're returning something, the goal is just to open the door at the UPS store, heave the box inside and then never think about it again. Do people want that kind of transparency?
EW: When they want it is when it goes wrong. This entire thing is an insurance play. What we found is that people care about two things: getting the items out of their house, they don't want to look at them anymore. And then the second thing is they want their money back. And so our goal is to be able to get you those two things as quickly as possible.
When I started reading about Returnmates, the very first thing I thought of was this company Shyp from a few years ago. They had a different spin on the dream, but the same sort of beautiful dream: I have this weird thing, and I hand it to you, and it's gone. And who wouldn't pay $5 or $6 to just have this dumb thing out of my house? But they just couldn't make it work as a business. So what do you learn from Shyp?
EW: Shyp was kind of our case study going into this. I think it's really important to understand what other companies have done in the past. Shyp, from our perspective, had an incredible team, and had a significant amount of funding and a really compelling idea. I think our analysis of it was that the business model just didn't necessarily fit with the needs of the customer. Their business was on demand. What we found with our business is that we get the most efficiency, and better unit economics, when we batch everything for next day. So we take all these requests overnight, and then we optimize our routes the next day, which gives us an incredible amount of efficiency with our driver base.
And then in addition to that, timing matters, right? We are now in this world where ecommerce has grown exponentially. They say it's accelerated 10 years into the future just based on the past couple of years. And consumer expectations have changed. I think it's much more common now to have someone come to your door and drop something off, whether it's a food delivery person or an Amazon driver or someone's picking up your laundry. These things are all commonplace, and that's why we feel so bullish that returns picked up from your home will just be table-stakes for brands eventually, because it's just going to meet the consumer where they are and meet the expectations that they have that have been growing over time.
KZ: Convenience is just that common thread for everything. One thing we've seen is, as soon as people use our service once, they're in. Our retention numbers are something like 95%. Why would I go out of my way, when I'm probably busy and working, I might not have tape, I don't have a printer. No one has a printer these days.
That brings me to my part of this I am the most fascinated by, which is actually putting people's crap into boxes. Do you just have to sort of build an army of amazing box packers using? I'm imagining a warehouse full of, like, loose cardboard and knives and tape and just like Santa's elves working in there all day. Is there a way to do that that is efficient and thoughtful and good, or is it just crazy labor all the time?
EW: So a couple of interesting data points from what we've seen. The first is, 80% of pickups that we have, don't need a box.
I would have guessed the exact opposite.
EW: They already have a bag, or they already have a box. We've also set some parameters on the business where we don't take anything that wouldn't fit in the trunk of a Prius. Gig drivers, a lot of them have Priuses. We do these one-off cases where we'll box a dollhouse or a small rug, things like that. But for the most part, we receive these items, and they just need a slap of tape, or they need the label affixed, things like that.
But the other really cool thing that we're doing is reusing boxes. We get extra boxes all the time, just by nature of the business. We'll also ask customers if they want to donate any boxes or have them recycled, and then our drivers take them, bring them back to our warehouse, and we reuse them. Because as long as the box is structurally OK, and it can get the item back to the retailer in the same condition as when we packed it, why wouldn't we be using the same box? There are millions and millions of boxes just floating around every single day. Horrible for the environment. So in our opinion, we'd rather just reuse them as much as possible, to not put more in circulation. Our goal is to actually put fewer of those in circulation over time.
How do you think about the experience for drivers? Because it's less immediate, you're not sending people around every second of every day. But as you think about sort of what the gig version of this is supposed to look like, what's the goal?
EW: What's really cool about this opportunity for folks is that you don't have to interact with people. About 20% of our pickups are direct handoffs. So in very few cases are you actually interacting with someone.
Wait, so you're saying 80% of your customers are just leaving things outside of their house in beautifully, perfectly packed boxes? You have the nicest customers on the planet. That's crazy to me.
EW: Well I'll walk that back a little bit. Beautifully packaged, definitely not. In most cases, we get things that are unboxed, but there is a box or a poly bag with it.
OK, fair enough. And how do drivers get paid? Is it by the hour?
EW: It's typically by the route. So based on where that route is, and how long it is. There are ways that you can also back that out by hour, so we typically give them an average hourly earning, so that it's very clear what they would be making.
There isn't this sense of urgency around returns, like there is when you're hungry and you want food delivered to your house. Kristian and I feel very strongly that the world is actually moving toward this place where it's a slower demand, right? It's not on demand, it's slower demand. People are going to get things delivered the next day, or maybe later in the week, or maybe they group their deliveries together and get them once a week. And you see it now with different types of food kits, and these meal delivery services or other services out there that kind of just batch things together.
The world is actually moving toward this place where it's a slower demand, right? It's not on demand, it's slower demand.
We think this kind of fits into that category more so than the on-demand category. Just everything doesn't have to be on demand. Right? It's all about the expectations that you set with the consumer.
What is the white whale brand for Returnmates? The one that you're just like, if only we could get in the room with them and make them understand how much better we could make their lives, we'd take over the world?
KZ: My answer actually will surprise you, Eric, but I think it's Zara. Zara would be just insane volume, it's fairly easy to consolidate. There's no crazy items in there. So Zara is kind of the Mecca up there for me personally.
EW: Zara is also really interesting because it's fast fashion. And because their cycles are a lot shorter, there has to be an insane amount of waste, with these returns that are going back to their distribution centers that they're not selling.
Mine is Nordstrom. Nordstrom is obsessed with the customer experience. They never ask you any questions when you need to send something back or bring it back to them. They've come up with a bunch of different options, bringing it in store and leveraging their stores as fulfillment centers and all these types of things. And so when I'm lying in bed at night, thinking about these whales that we would love to integrate with, I think Nordstrom would be top of the list.
We can reroute items to all different places, we can consolidate them and run vans to your local stores, we can ship them back to your distribution center, we can run line hauls ourselves to your distribution centers and cut the carriers out completely. I mean, the opportunities are endless once we integrate with your supply chain.