A pair of former HauteLook executives believe shoppers who return online orders to stores represent additional foot traffic and potential new purchases, which is why they have launched a business centered on e-commerce returns.
David Sobie and Mark Geller launched Happy Returns, a business that works with online retailers to accept returns of online purchases at Return Bars in high-traffic areas like shopping malls. Return Bars will be 10- by 12-foot kiosks, with secure storage space nearby and two employees, which the company is calling “returnistas,” to process returns. The first Happy Returns site opened this week at the Santa Monica Place mall in Santa Monica, Calif.
Sobie says the concept has a twofold benefit: It makes it easier for shoppers to return online purchases and it generates foot traffic in shopping centers where kiosks are located.
Conversations with consumers and data told Sobie that returning online purchases was the worst part of shopping online. “There’s an overwhelming preference to returning products in person. There’s no wait. You get the satisfaction of knowing that not only have you returned the product, but you’ve got the money back on your credit card,” Sobie says.
Happy Returns has signed on one e-retailer so far, online consignment retailer Tradesy, and is in discussions with “dozens of others” according to Geller, though he declines to give details.
The company makes money by charging retailers a fixed fee per return. Geller did not specify the fee, saying only that “the fixed fee is less than the cost of return shipping.”
“We’re able to offer that in part because we’re aggregating the returns before shipping them back to the online retailer,” he adds. “Instead of having three shipments go back, there’s one box with three items inside.”
Sobie points to Nordstrom Rack’s success in generating foot traffic from HauteLook shoppers returning online purchases in store as evidence of a market for Happy Returns.
Sobie worked as senior vice president of marketing at HauteLook and Geller was head of mobile when Nordstrom, No. 19 in the Internet Retailer 2015 Top 500 Guide, began accepting in-store returns from HauteLook shoppers in late 2013.
The program proved popular with HauteLook shoppers. Nordstrom co-president Erik Nordstrom said during the retailer’s Q4 2014 earnings call that over 70% of HauteLook and Nordstrom Rack returns took place in Rack stores.
“This singular capability drove nearly one million incremental trips to our Rack stores,” he told analysts on the call, according to a transcript from Seeking Alpha.
Happy Returns launched with $1.9 million in seed funding, with Southern California-based venture capital firm Upfront Ventures leading the round. Upfront Ventures also participated in same-day delivery service Deliv’s $28 million Series B funding in February.
In addition to charging retailers a fee on each return, Happy Returns seeks other revenue sources, including potentially setting up an e-commerce site to liquidate returned items that retail clients don’t want. The company also hopes to its return kiosks will generate increased foot traffic at stores and shopping centers which, in turn will create sales in mall stores. If so, Sobel believes the company can charge malls for the additional traffic.
The company is focusing on shopping centers and malls for now, but future Return Bars may be in grocery stores, coffee shops or even a traveling unit, Sobie says.
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