Not all sales are final. In fact, more than half–54 percent–of all customers surveyed by research firm WBR Insights last year said they had returned at least one gift they received during the holidays. This year, UPS has said it expects to handle as many as 1.9 million returned packages per day in early January. For retailers, that means significant resources spent processing returns and repackaging them to be sold again.
Happy Returns co-founders David Sobie and Mark Geller met nearly a decade ago while working for online apparel retailer HauteLook. When the company was acquired by Nordstrom in 2013, they pitched their new parent company on a program that would allow HauteLook shoppers to return their items at Nordstrom Rack stores, eliminating the need to go to the post office and wait a week or more for their refund to process. Rack would get the benefit of some additional foot traffic–and customers who suddenly have extra cash to spend. “A win-win,” says Sobie.
After some convincing, Nordstrom agreed. “We all threw five bucks in a pool in the office,” says Sobie, “and everyone had to guess what percent of HauteLook’s returns would find their way to Rack six months after launch.” Guesses ranged from low double-digits to a high of 30 percent. “Fast-forward six months,” Sobie says, “and the number was 72 percent.”
The program’s success inspired Sobie and Geller to branch off and try to create a stand-alone business based on the same concept. In 2015, they secured a $2 million seed round from Upfront Ventures and Lowercase Capital, convinced a handful of clients to pay for their services, and launched the following year.
“Returns are expensive and cumbersome, and there are a lot of challenges that go along with handling them,” says Travis Heard, CFO of online apparel brand Outerknown. That’s why the company was convinced to pay for Happy Returns’ services in 2018. Now, all of Outerknown’s returns are handled by the startup, with mailed returns getting sent directly to a Happy Returns hub for repackaging. Happy Returns also operates a returns portal on the company’s website, where customers are prompted to answer a few brief questions about their issue with the product. If it’s something like size or color, they’re presented with similar items that might work better.