You don't want to see your product being sold in in countries where the return rate in in the United States is bigger than the entire reset, than the entire forward sales. If you take that product and export it into smaller markets, the returns volume could be bigger than your forward volume and it could truly disrupt that, Brad. Hello and welcome back to the retail podcast.
I'm joined by sender Seamus, the CEO and Co founder of Return Pro, And I think we're going to, we're in for an interesting conversation with an executive from the, the, the one of the biggest headaches in retail that may be getting worse, given the what, what's been going on on a global scale from tariffs and everything else and how you manage that. But Sender I, I mean, obviously you, you, you, you built this business from the ground up and over 1718 years, how come you
went for a name change? What? What was behind the name change? So really I think it was just a directed kind of targeted audience that we were going after. We we started the business strictly in the logistics world and then over time I come from the software world. So over time we kind of delved into software and then ultimately into re commerce and the Recon group was supposed to be or eventually TRG and then ultimately go TRG, supposed to be a combination of companies
that help solve returns. And overtime we went through all these crazy mission statements and, and overtime we finally got to solving returns. I know that sounds super simple, but it took 16 years to get into those two simple words, solving returns. It took the same 16 years to calling it return pro. We are a collection of return pros. That's what we are. So I think it's, it's very fitting to to name ourselves
return pro. We very much focus on returns and that's kind of the key initiative. How do we bring this product back to life? How do we reduce the returns? How do we go through all that? And that's the main reason and focus behind the the name change. And I think it galvanises the team, gives them a very clear path to what it is that they're supposed to achieve and and gives a very strong communication to our client base, customers and the industry as all who we are and what we do.
Now you guys went quite big NRF, we were just talking off camera about your sponsorship of obviously the stage. I I saw your stuff in the press room and I'm conscious of the fact that you must have met a lot of executives while you were at NRF. One of the main questions I asked what's top of mind for for the executives that you're meeting within the industry or in a broader sense, what's what's been top of mind the people you've been meeting?
So first of all, we, we sponsor pretty much every year. You know, there's different levels of sponsorship. We sponsor within, within our financial abilities, so to speak. And I mean it's very important to get it out there. Over the years we've been going as you know, TRG go TRG for the last, I don't know, six years or so and we go to multiple trade shows. I think belonging to then RF is extremely important. It's the largest body for for retail within the United States.
And I think as we speak to retailers over the last decade, we find that a lot of the executives just didn't know what returns were all about. And you'd think that, you know, at a large enterprise retailer, they'd understand what returns are all about and kind of get into the degree of it. But it was kind of, you know, the black sheep of the family.
It was in the corner somewhere in a warehouse or people never talked about it. They front loaded the cost into the cost of the product itself, whether on the front end when the purchase agreement was made between the retailer and the vendor or on the back end. And the back end happens a lot as well on the on the back end, they front loaded as as well into the actual cost directly to the consumer.
And for for retailers lately with, you know, the looming political climate, whether it's tariffs or or inflation, they really needed to kind of find other avenues to prop up their net margins. And the beauty of of retail is and returns the themselves is that the more you save on return, the more of that product you bring back to life.
Every single penny of that goes back to your Net margin and that's the cool part of it. So if, if returns represent and I think I think we'll get down to this path, sorry to jump ahead, but returns are about 890 billion in 2024. That's the in around number. the US sales are around, let's call it 8 point something trillion and out of that maybe 5.2 or so are consumable returns that are not food. So you've got you are a return rate of like, let's say 16 plus
percent. That's a massive number. Most businesses don't have a 16% margin. So you're talking, you're talking every basis point that you recover goes back straight to Net margin. And that's the beauty of it. And these executives are starting to understand that. And to your point, we're starting to have that conversation with the jicular. We used to have it at the manager level, director level, senior director, maybe junior VP.
Now we're starting to talk to C staff about it because they're very interested. And that's the cool part. People are finally starting to listen it. It took a short 17 years. Yeah, Well, I mean, look, I've, I've having worked with a lot of executives just before the inflation problem that kicked in and the cost of living crisis. It was, you know, how am I going to find another 25%? How am I going to find 15%? Because I'm not going to grow 15
or 25% in my business. Inflation is eating my margin. How, how am I going to do this? And so therefore, I, I expect a lot of leaders will be thinking about as these because next it's Europe, next, you know, it's just going to keep trickling around the world and we'll see. And so I can imagine retailers are looking at what are the trends. I mean, you mentioned 890 billion during the holiday season, right? That was the. No, no, that's the annual number.
That's oh, OK. That's the annual number. What do you, what do you know? So what do you noticing in the sense of trends then in terms of is everyone just ordering 3 of everything or why are we? Why is it such a problem? I think you know as as you watch e-commerce grow, obviously as a society, whether it's in the United States, Europe or anyone developed world, we are gravitating towards more and more online shopping. A big part of online shopping is
obviously clothing and apparel. And we all know the clothing and apparel has problems, especially when people are bracketing. And bracketing is the practise of buying two or three of the of the same product in different sizes and hoping one fits and returning the rest. That's terrible exercise and there's a lot of technology that we can put into in place to fix
that. And but reality to answer your question directly is that as long as e-commerce sales continue to grow and become a bigger factor and either way at brick and mortar sales, that number is going to keep growing. And I think that there's a lot of things we can do on the front end and solving returns a big part of the issue and the way we view it. And I think we'll kind of just dive right into it and it doesn't matter. We say this internally all the time.
What's it doesn't matter if we have the solution or not. As a business, you have to think of the vision that solves the problem for your customer and work towards that. So you're the innovator. Your job is to innovate. Your job is not to say how can I make another dollar? And within that innovation you can find your space. How are you going to profit from that?
So when you look at it, you need to speak to these retailers, vendors, brands, whatever you want to call them all throughout the supply chain and ask what is your issue with returns. And most of them depending on the category though. And then we, we, we basically a service 259 categories, which is a massive number. And we do everything from apparel to consumer electronics and furniture and HomeGoods and power tools and hand tools. And there's a whole slew of
product. Every single return rate is different depending on the category that you're servicing. Of course, the largest is always going to be apparel. But there are things that you need to do on the front end to say, OK, how do I stop this? How do I mitigate this?
Because the most important thing you can do as a business when you're offering the service, get a front of the consumer and find out how you can reduce that return and not by saying, let me offer you an exchange after the return occurred. How do I stop the return from occurring in the 1st place? What technology do I have to give you? What information do I have to give you better sizing? You have to create widgets for sizing across platforms.
You have to see Bloomingdale's and Macy's and and see that the size of a Levi five O 1, you know 30 by 32 is the same as a Wrangler, you know, X with a 30 by 30. Is that the same? How do you create that technology? How do you get it adopted across brands? How do you get it adopted across retail platforms? There's a lot of this type of preconceived tech that lowers the return rate that the retailers are very interested in.
And of course, no matter what, we live in a consumer society and whether it's Europe or the United States, we love the consumer. We're not stopping any time soon, tariffs or no tariffs. And I think that no matter what, you're going to have to deal with the physical return. And that's also an important part of it. Teaching them that walking through that is is kind of a mission, right? Shrink is a is a big problem in retail and so you know, return fraud and and how you prevent
that. Maybe we we should unpack what for those who don't know what your business actually does, what it does, but I'm curious how it lends itself then to protect retailers from return fraud. So I think let's start with the pre purchase. The idea is there's three facets to return, right? The first is the pre purchase. What happens before? What leads to that return in the 1st place?
Why did you return an item? Well, a part of it is what we just talked about, sizing wrong templates, just bad information that wasn't the customers. The customer can make a better decision, a more informed decision as to what they want to buy and they end up buying multiple items. The second is fraud and there's two types of fraud. There's organised fraud and there's something called
wardrobing. Wardrobing, we all know, some of us have done it. Some of us watch our friends do it and they, you know, you'll buy a cocktail dress, go out and then you'll return that cocktail dress and and that's fraud. I know a lot of people think, oh, it's not, I'm doing nothing harmful. Well, you're doing something very, you bought a product under the pretence of keeping that item. You had no concept, no, no intention of keeping it. And ultimately you return that
item. Now that retailer or that brand has to deal with that product, whether they have to sanitise it, bring it back to life, maybe it's damaged, whatever. It costs a lot of money, the shipping cost, handling cost, all that. So that's something that we have to deal with. And the way we deal with that as a business is we create these trusted customer algorithms that those are very, very important. And we work with other businesses to establish different customers across
platforms. And then the pre purchase piece, I talked to you about that we make sure sizing is right and things of that nature. And there aren't a lot of players in the pre purchase. Most of the players actually exist in the post purchase. So to me, returns are three things, pre post and the physical handling of the goods.
So the post are a lot of the businesses out there that you see that created the return portals because they're easy, A lot of the investment communities just dumping money into the into these portals. And there's probably 200 of these portal companies. The problem that I see with the portal company and the reason why we don't follow that business model we haven't for 17 years is that the portal community simply wants to give you a piece of software as a
brand, as a retailer. That doesn't help. You need a solution of how to handle that product. First you need preventative measures, which is software and and physical. And then you need the ability, if the return does occur, to create that portal, to have that technology. The returns regions, the exchanges, the trusted customers, the keypad algorithms, all those things are important. But then what happens when the physical item gets returned, $200 billion of the $900 billion is spent.
So on 900 billion or approximately 900 billion of returns, 200 billion is spent on supply chain dollars when the recovery as a whole is about 133 billion. So they're underwater, that 66 billion, meaning that if you took the returns and put them in the garbage, you would be financially better off. Of course, that's not an alternative. It's not good for the environment, it's not good for the retail, it's not good for
anybody. But the money is really going to these transport companies, right? The FedEx is the DHL is the UPS because they're moving the product from place to place. So solving returns, solve the pre, avoid the return if you can't take the return, create the technology, but then physically handle the product to bring the product back to life. That's such an important part of the journey. And I get passionate about it, you know, because it's what we do.
And I love this piece and explaining it to people like, oh, doesn't the product just go automatically back on the shelf? Sure, for things like clothing, about 90% of it can go back on the shelf, but it still needs to go to the supply chain and touch by person. But for some categories that have privacy issues, like data privacy, like electronics, less than 4% go back on the shelf. That's a mind boggling number. That means 96% has to be touched by humans before they're
allergies. Where are you going to touch them? A $20 Roku Stick is not worth touching in the United States. You have to plug it in, you have to data wipe it, you have to test it. These are very expensive things. So you have to have those economies of scale on top of that supply chain industry. We have 11 facilities in, in, in 8 facilities in the United States, two in Canada, 2 in Mexico, one in Southeast Asia, just to bring that back and forth.
We're a small company, Yeah, you know, it's like 3.7 million square feet. Just working on the functionality of bringing the product back to life. So we're not just a software company, we're not just technology company, we're not just a re commerce company. We are all those things because our goal is for you as a retailer, as a brand, to take that product and put it back on your marketplace. No, that's OK. You mentioned 2 important points that I just want you to sort of
take us through. One of them is your trusted customer algorithm and how you know, low cost items, you may, because you trust them, there's a trust element in there. And so therefore, you know, keep, keep the product if it's, it's, if it's meet certain metrics. And then how are you reducing products from going to landfill like the Roku example? I'm just thinking, does the model say, well, don't touch it, just throw it away? So I'm just curious, how are you specifically help in those
areas? So it starts with really good tech. I think trusted customer algorithms, the bigger the retailer, the less they're going to let us handle it. I think the larger enterprise retailers, we work with them a lot and we help them provide information about their trusted customer algorithm for themselves, but they have their own and our job within the supply chains to feed that data back customer X particles received. It wasn't as described, it
wasn't the right product. Don't trust the customers more. Ding their, their, their lifetime value by X amount of dollars and make sure that that LTV ends up being, you know, decremented by X amount. And if it's below a certain threshold, then don't trust the customer anymore. And that's kind of how most of the algos work for the small, for the smaller and medium sized businesses, we of course provide
that for them. The second part, which is just as important, which is that example of a Roku stick or something as simple as a Stanley mug. You know, Stanley mug doesn't have a lot of proprietary technology. It's a brand, it's something very cool. It's a piece of stainless steel and it's fairly easy to to to run a very rigorous supply chain operation on it, make sure it's sanitised and put it back into the marketplace. But where would you do that?
It's a 1520 thirty dollar item. You're not going to do that in the United States at an average labour cost of $2223 loaded. You're going to go into a a market where that that economy of scale makes sense. So maybe you're going to go to Mexico if it's a less expensive item with less technology, Maybe you're going to go to Southeast Asia where you're going to put some more work into it and bring it back like maybe into Canada. And that's why we have these facilities and dots because that
technology is important. That algo that we have reads that information. It uses some basic machine learning. There's a bunch of agents that we have that are built across that from categories to price to customer sentiment to all that, that work and understand what the value of the item is going to be at the end. Because we run our own supply chain, we know that what the ERP costs or what the management cost of touching that product is going to be throughout the life cycle of the item.
And we put all that data together and say, OK, hot dog, no hot dog. You know, at the end of the day, that's where it ends up and it it it sends it to the right channel. Our goal is to make sure nothing ends up in the liquidation pallet, nothing ends up in landfill. We want to bring that product back to life and give it to the original Brett. But sometimes these brands don't have that technology. They can't even take refurb or secondary market products onto
the marketplace. So we start off by helping them sell it on other marketplace and ultimately over over the years we work with them to create their own secondary market platform right on their websites and they we can resell that product within their environment, attract that secondary market customer. And it also gives something very important which you didn't mention. And I think we'll get to there's a huge brand protection element.
You don't want to see your product being sold in in countries where the return rate in the in the United States is bigger than the entire reset and then the entire forward sales of that product. Then you can take, you know, computers like Lenovo, HP, Dell, or even simpler stuff like TTI that has Milwaukee brand and, and other brands that are Black and Decker and things of that nature.
If you take that product and export into smaller markets, the returns volume could be bigger than your forward volume and it could truly disrupt that brand. So we work with those brands to make sure that you're not your product doesn't end up in those
in those those places. One of the things that we used to anecdotally say, which it sounds like there's data behind it, is the fact that your returns policy is now going to dictate your sales ability because customers actually care about the returns policy and they make their decisions on it.
And your research showed that 77% of shoppers factored that in. I'm just curious what like the one or two things that you find that consumers or shoppers are looking for from a returns policies that retailers really need to pay attention to? I think there's a trend out there right now with returns insurance which they charge a customer or maybe the brand pays for it upfront to ensure the package on the way back they basically ensuring the shipping
of the item back. I think ultimately over time the consumers going to speak and consumer wants ease ability of purchase. They don't want they want very transparent return policies. They don't want to know that they didn't pay for some insurance and now they have to pay for shipping. They don't mind being directed to drop off locations. They also don't want to walk into supply chain drop off locations. So what they're looking for is a better shopping experience.
So if I bought my item online, you know, at a Walmart, I want to come back to a Walmart to return it or maybe another retail where I'm going to enjoy spending that money again. And that's OK. If you charge me for an H&M item and you say if, if, if I'm not going to walk into an H&M store and return it at an H&M store, maybe I'm going to get charged $2.75 for shipping it. That's fair. But if you're strictly a.com reseller, I suggest that brands
don't do that. That's a very bad idea. And that's a very bad idea because they're going to alienate their customer. The customer is not going to want to pay those fees. And I think over time the model is going to prove itself out. You know, convenience always right from from Sam Walton to Jeff Bezos, customers always right the light and excite the customer. That's the single most important thing.
And that's our goal. Although our customers, the retailer and the brand and the vendor, we make sure that we follow that ethos that they have, which is really, really delighting those customers. I got your final question. When you look to the future, given everything that's going on, how do you see this world evolving? I think that returns are the most complex part of the
ecosystem. I think what you find is the retailers avoid it and it's kind of like the black sheep as I described at the beginning of our conversation, because it's so complex. Normal enterprise retailers are departmentalized, right? There's a supply chain department, transportation department, there's a retail department, branding department, merchandising department, and all these departments don't really communicate so well amongst themselves and returns, unfortunately, it touches every
facet of it, right? Even the way merchandiser negotiate. With the brand is important because that return policy is set right then and there. So I think the first and foremost in the future as the enterprise retailers and the executive staff really start understanding the impact of returns and they want those dollars or percentage points back on their Net margin, they're going to start to tie that thread together. Maybe they'll have a chief returns officer, maybe they'll
have an executive of returns. That's a really important part of the future. Additionally, I think machine
learning plays a huge part. I think what we do is extremely complex and we've started, you know, really letting some some agents help us out in smaller areas of the returns ecosystem, buying this very complex threshold together and, and asking a machine to make a decision that would take a human being on maybe 100 million UPC's, you know, months to make and run a bunch of algorithms and have a lot of mistakes that come out of the end in terms of how you disposition these items
is always easier than than having a human. So I mean, that's the real disruption here. It's a machine that can thread all those things together and the understanding of the C staff level that we need this, that we have to solve this and that kind of buy in is what we've been excited about. That's why the last 16 years were fun, 1617 years. The next 16-17 years are going to be more fun. Sure they are again. Yeah. Anyway, onwards and upwards as
they always say. Sandra, thank you so much for giving out. Carving some time out for us. Will you be a shop talk? I will. I will. OK. Look forward to come. I'll come and say hi. Yeah, looking forward to meeting you in person. Thank you very much, Sandra. Thank you.