You've probably already decided the fate of all your holiday gifts: kept, regifted exchanged, or returned. If you chose the latter route, though, the story of your unwanted present is far from over: "Most people assume that when they return an item, it goes back on a shelf or back online," Tobin Moore, cofounder and CEO of Optoro, a startup that helps businesses manage returned and excess inventory, told Refinery29. The ugly truth? Your unwrapped-but-unloved present will most likely end up at liquidators, wholesellers and resellers, or even landfills, since most returned items simply can't be resold as new (no matter how little use they've gotten). Reverse logistics firms like Optoro are striving to change that wasteful pattern.
Optoro's services include a cloud-based software called Optiturn, its e-commerce platform Blinq, and liquidation channel Bulq, and up-to-date data to ensure maximum recovery and optimal inventory management. The company is currently working with 20 retailers, according to The Los Angeles Times. Even if the product does make it back to its first home at the distribution center in mint condition, it could still be too late: "If the item has been taken out of the box and the packaging seal is broken, the item is not new. If the item is a consumer electronic and was used for a few days, it is not new. If it is a piece of clothing and the tag was removed, it is not new," Moore said. Translation: Your barely unwrapped holiday gifts must find new homes elsewhere.
The situation has only escalated with the dawn of e-commerce (and free returns), Moore says. "Nearly 15% of all e-commerce sales are returned, compared to 8.6% of brick-and-mortar sales," he explains. In an annual consumer returns study conducted by The Retail Equation and the National Retail Federation (NRF), total product returns represented a $260.5 billion loss in sales for retailers in 2015. Customer Growth Partners, a research firm that specialized in retail, estimates that $62 billion worth of merchandise purchased between November and December 2015 alone will be returned.
This largely stems from the fact that retailers only look at half of the equation: the forward logistics, which "focuses on the forward flow of goods, including production, packaging, inventory, and transportation," Moore tells us. This means goods moving in one direction — onto shelves — and not the only way around, and businesses investing "billions of dollars in order to compete with Amazon and other new e-commerce companies." When a consumer sends a product back, it gets complicated. "Traditionally, returned and excess inventory are shipped multiple times over the course of several months before reaching an end consumer," Moore says.
Moore first got into the reverse logistics biz while as a senior at Brown University, when he embarked on his first entrepreneurial venture — an eBay drop-off store called E-Spot. The platform to help individuals get the highest value out of their belongings (inspired by his own father, who possessed many knicknacks and collectibles but no efficient way to resell) piqued Moore's interest in an entirely different side of retail. "After a few years running that business, local retail stores started coming to us asking for help selling their returned and excess inventory on a larger scale," Moore recalls. "At first, we were working with small local boutiques and jewelers, but we quickly realized that this was a huge pain point for all retailers, including the big chains — over $500 billion of inventory is returned or deemed excess every year — and [we] shifted our business model to focus on large retailers and manufacturers, instead of individuals."
He and cofounder and president Adam Vitarello (who worked with Moore on E-Spot) scaled accordingly for Optoro. Then, they noticed a larger, industry-wide issue: "Returns are traditionally shipped five to six times through a chain of liquidators, wholesalers, and resellers, losing value and creating a ton of waste." The duo wanted to create a more efficient, environmentally friendly way to handle returned merch, so they created software, Optiturn, that does just that for retailers. There's also BLINQ.com (for direct consumers) and BULQ.com (for resellers), which are Optoro's secondary marketplaces that stock these returned goods.
Retailers just might need a change in mindset. "Our current form of consumerism — buying items and discarding them — is not sustainable," Moore says. "We want to create a circular economy for consumer goods so that items are reused, rather than ending up in landfills." Customer returns aren't going anywhere, considering that in 2015, Optoro processed 10 million items, giving products a second life on secondary marketplaces. Shoppers will have to adjust accordingly, as well: In order to achieve a real circular economy, we need to create an attitude shift where everyday consumers are open to the idea of purchasing used and excess goods," Moore explains. "By doing so, they will help reduce waste in the system and ensure that millions of quality items don’t end up in landfills."