Speaker 1: Pushkin.
Speaker 2: There's this genre of YouTube video, the unboxing video. It
Speaker 2: starts with somebody on screen with a package that just
Speaker 2: got delivered. It's something they ordered online, a watch or
Speaker 2: a stand mixer, really could be anything, and the video
Speaker 2: is just the person opening the package and then opening
Speaker 2: the box inside the package and taking out this new
Speaker 2: thing that they just bought. That's it. That is the
Speaker 2: unboxing video, and it's not really my thing. I want
Speaker 2: somebody to make reboxing videos. Some practical middle aged dad, say,
Speaker 2: decides he really doesn't need those those hiking boots that
Speaker 2: he ordered online last week. We see him putting the
Speaker 2: boots back in the shoe box and then putting the
Speaker 2: shoebox in a cardboard box, taping it up, maybe putting
Speaker 2: able on the box, and then dropping the box off
Speaker 2: at ups for that sweet, sweet full refund. That is
Speaker 2: relatable content. I'm Jacob Goldstein and this is What's Your Problem,
Speaker 2: the show where I talk to people who are trying
Speaker 2: to make technological progress. My guest today is Ahmatsharma. He's
Speaker 2: the co founder and CEO of Narvar. Narvar works with
Speaker 2: companies like Sephora, Lululemon, and home Depot to manage the
Speaker 2: post purchase phase of online shopping, tracking alerts, and crucially,
Speaker 2: returns and returns are huge, hundreds of billions of dollars
Speaker 2: a year in the US overall, something like ten percent
Speaker 2: of online purchases are returned, and for categories like shoes,
Speaker 2: it's even higher, around twenty five or thirty percent. For
Speaker 2: the retailers I'm it works with, this is profoundly expensive.
Speaker 2: So the problem I wanted to discuss the omet was this.
Speaker 2: E commerce companies have trained us to love free returns,
Speaker 2: but will they be able to afford it to start? Though,
Speaker 2: we talked about just the basics of how returns work.
Speaker 2: What happens when I send back a pair of shoes.
Speaker 2: I know there's lots of options, but I do whatever
Speaker 2: I ship it off. What happens to that pair of
Speaker 2: shoes that I have bought and sent back next? Where
Speaker 2: does it go?
Speaker 1: Once that pair of shoes gets back to the retailer,
Speaker 1: they will do what they call the grading process, which
Speaker 1: will say, hey, is this shoe is in a good
Speaker 1: condition to go back on shelf to be sold again
Speaker 1: as a proper full price item.
Speaker 2: So as a new pair of shoes? Yeah?
Speaker 3: If not?
Speaker 1: If it is you know, if it's scuffed or there
Speaker 1: are some issues, can it can be sold on hey,
Speaker 1: worn already or a discounted piece of it.
Speaker 3: So there's a second way of doing that.
Speaker 1: Third is that if it is completely in non sellable condition,
Speaker 1: then you know, retailers have a couple of options. Either
Speaker 1: it goes to landfill or you can actually sell sell
Speaker 1: into secondary market, which means it may show up on
Speaker 1: other market places such as eBay.
Speaker 2: So does that mean that when I'm buying shoes online,
Speaker 2: are they usually shoes that somebody has like bought and
Speaker 2: then returned? Like? How often when I buy a pair
Speaker 2: of new shoes has somebody bought them and returned them?
Speaker 3: It's a good chance.
Speaker 1: I mean, you know, usually for a pair of shoes,
Speaker 1: it might take three or four round trips to find
Speaker 1: the right home or right pair of feet to get there.
Speaker 2: Wait, when you say three or four round trips, do
Speaker 2: you mean most like is there for a typical pair
Speaker 2: of shoes sold online? It goes out and back and
Speaker 2: out and back like that's a normal things.
Speaker 3: Normal thing. I mean typically people will buy one size
Speaker 3: up and one size down.
Speaker 1: Twenty plus years ago, Appos when they started in the place.
Speaker 1: I mean that there was a they changed the equation
Speaker 1: free shipping and free returns both ways out and then
Speaker 1: you know, you will see all the experience and the
Speaker 1: stories out there from consumers where they're trying on shoes
Speaker 1: and they're keeping what they like or fit, and the
Speaker 1: returning rest of.
Speaker 2: It was the Zappos free returns thing, like the watershed
Speaker 2: moment for returns. Is that the like glowing origin story
Speaker 2: of online.
Speaker 1: Returns absolutely hands down, and Zappos and Zamazon they changed
Speaker 1: the equation for consumers for good.
Speaker 2: I want to talk a little bit about the kind
Speaker 2: of evolution of online returns, right, So Zappos was what
Speaker 2: their early oughts. So before Zappo's hard for people to believe.
Speaker 2: Now you had to pay to return stuff where you
Speaker 2: bought it online.
Speaker 1: That is correct, And you may even have to call
Speaker 1: the contact center or customer service to even get an
Speaker 1: authorization that you can even return it. Hey, I am
Speaker 1: so and so and I placed an order and I
Speaker 1: would like to return it. It gets authorized, then only
Speaker 1: you send.
Speaker 2: It back, like the companies really didn't want you to
Speaker 2: return stuff you bought online.
Speaker 1: Well, that's one way of saying it. If you want
Speaker 1: to speak with brands and retailers. They would say, we
Speaker 1: really want you to make sure you're buying what you
Speaker 1: want to keep.
Speaker 2: And I mean it makes sense, right, I mean it
Speaker 2: must be profoundly expensive for companies to deal with returns, right,
Speaker 2: I mean, let's talk about that. So, first of all,
Speaker 2: free returns are not in fact free, right, We're all
Speaker 2: there included, we're all paying for free returns, whether we
Speaker 2: return stuff or not.
Speaker 1: Absolutely. I mean there's a cost of shipping or bringing
Speaker 1: it back. There is the labor cost of as we
Speaker 1: just discussing, inspecting it, grading it, you know, putting it
Speaker 1: back on shelf, and then selling it again.
Speaker 3: So there's so much cost.
Speaker 1: And then, as we discuss, not everything goes back online
Speaker 1: to sell full price. You know, twenty thirty percent of
Speaker 1: items get discarded, either in the secondary market or landfill.
Speaker 1: So they say tangible, significant cost associated with returns.
Speaker 2: And I feel like for companies at some level, this
Speaker 2: is an optimization problem, right. They want to maximize sales
Speaker 2: while minimizing returns, and to some extent those things are
Speaker 2: our intention for.
Speaker 3: Them, absolutely, no doubt about it.
Speaker 1: And then our analysis shows to quantify that for you know,
Speaker 1: every one hundred dollars of online sales, roughly twenty five
Speaker 1: or twenty six dollars of impact comes from returns.
Speaker 2: So that's twenty five percent of the gross twenty five
Speaker 2: percent of their gross revenue is dealing with returns.
Speaker 3: Absolutely, yeah, a lot, Yeah, it is. That is a lot. Yeah,
Speaker 3: it's a massive number.
Speaker 2: Is part of what your company tries to do to
Speaker 2: get that percentage down.
Speaker 1: Yes, So there are a couple of things that you
Speaker 1: have to think about. You can actually figure out what's
Speaker 1: the most optimal way or the cost effective way to
Speaker 1: bring the goods back to the merchant. So who is
Speaker 1: the right carrier, which is the right location to drop off?
Speaker 1: And there are cost effective ways. Second A is enforcing
Speaker 1: your returns policy.
Speaker 3: Right.
Speaker 1: So if you are, you know, buying something online and
Speaker 1: retailer has thirty day policy, you don't want to offer
Speaker 1: or honor returns at day forty five or day fifty.
Speaker 2: I have observed that different companies make it easier or
Speaker 2: less easy to return things, right. I will say, you know,
Speaker 2: sometimes you can just bring the thing. You don't even
Speaker 2: have to put it in a box. You just bring
Speaker 2: the thing to whatever the drug store or all foods
Speaker 2: and give them the thing which feels like magic. Sometimes
Speaker 2: you have to like put it in the box. Sometimes
Speaker 2: even have to print out the label, which who even
Speaker 2: has a printer. I have assumed that those were deliberate
Speaker 2: choices on the part of companies, and that there was
Speaker 2: a strategic reason to make it harder to return things,
Speaker 2: which is it would cause people to return things less
Speaker 2: for sure.
Speaker 1: But Jacob, let me ask you a question. Would you
Speaker 1: buy your pair of shoes when it is arduous or
Speaker 1: a difficult process to return from the company that you
Speaker 1: would like to buy.
Speaker 2: If they were a lot cheaper? Maybe right? If there's
Speaker 2: something take running shoes. I buy basically the same pair
Speaker 2: of running shoes every few months. I know what running
Speaker 2: shoes I want. It's the Nike Pegasus whatever is last
Speaker 2: year's model. I've been buying them for many years. And
Speaker 2: in fact, when I buy those shoes, I go to
Speaker 2: like weird second tier retailers because I just want to
Speaker 2: buy them cheap. I know what they are, so in
Speaker 2: those instances I am more price sensitive and less concerned
Speaker 2: that my returns will be easy.
Speaker 1: But do you bring a really great point? And the
Speaker 1: consumer behavior is in essentially two pieces, right value seeking
Speaker 1: whether it is a good value.
Speaker 3: For the product you buy, or convenience seeking. Those are
Speaker 3: the two pieces.
Speaker 1: So the question is, you know, for businesses to grow,
Speaker 1: they not only need their loyal customers, but they need
Speaker 1: the next set of new customers who are coming to you.
Speaker 3: Right and if you're a brand or a retailer.
Speaker 1: And if you are attracting the customer for the first time,
Speaker 1: they actually do check your help section and retailer's FAQ
Speaker 1: to make sure what are your returns policies. I'm not
Speaker 1: comfortable buying for the first time for a brand or
Speaker 1: retailer if I don't know if those pair of shoes
Speaker 1: and I have easy to understand or easy to follow
Speaker 1: returns process.
Speaker 2: I mean there's another version, and you do still see
Speaker 2: it sometimes, although it's rare, which is when you send
Speaker 2: something back they charge you for shipping. They're like, we'll
Speaker 2: give you a refund minus eight dollars for shipping. Like
Speaker 2: that is still a thing that one sees occasionally.
Speaker 1: Not not occasionally, you'll be surprised forty percent four zero
Speaker 1: percent of top online retailers in the US are charging
Speaker 1: for return fee.
Speaker 2: Oh you don't say, yeah.
Speaker 3: And typically in your example, what they will say, I.
Speaker 1: Will give you your money back minus the return fee.
Speaker 2: Like, behaviorally, that's a nice move, right because you're still
Speaker 2: getting money back and so like, I feel like it
Speaker 2: works with the behavioral economics pretty well. And do your
Speaker 2: customers choose that as well? Is that sort of on
Speaker 2: the menu of things you offer?
Speaker 1: Yeah, I mean we are a tech platform. You can
Speaker 1: design and define your returns policies. And I think earlier
Speaker 1: you were saying even the choice and convenience, whether.
Speaker 3: A retailer wants consumer to print the label in their homes.
Speaker 1: Or their offices if they're going to offices, or pack
Speaker 1: it yourself and then drop it off, or you just
Speaker 1: bring the item which is non boxed, don't have to
Speaker 1: print the label, simply go to designated places where they
Speaker 1: will scan your QR code.
Speaker 3: Don't worry about printing a label or package it.
Speaker 1: Then, all these things are designed based on the brand's
Speaker 1: position on those pieces, and they drive different behaviors. For example,
Speaker 1: if you give them the choice, they will actually return
Speaker 1: those items faster. It's not sitting in your car or
Speaker 1: back of your trunk and finding the right place to
Speaker 1: doing the returns.
Speaker 2: Let me ask you this, when a company makes me
Speaker 2: print out a return label? Are they doing it to
Speaker 2: reduce the chances that I will return the product?
Speaker 1: That's a good, good question. I never thought that way
Speaker 1: is just giving and.
Speaker 2: Why else would they do it? You know, there are
Speaker 2: companies and I like this. I like this. There are
Speaker 2: companies that will put in the package they're shipping you
Speaker 2: a return sticker label right where you open the bag.
Speaker 2: It's like a plastic bag and you take out the
Speaker 2: shirt or whatever, and A the plastic bag is resealed,
Speaker 2: and b there's a sticker return label. And like when
Speaker 2: a company does that, I'm like, they're on my side.
Speaker 2: I mean, they're on my side. Is kind of a dumb,
Speaker 2: naive thing to think, But I think, oh that's nice,
Speaker 2: Like that is going to make me a more loyal
Speaker 2: customer of this company because they are not deliberately making
Speaker 2: it hard for me to return this shirt.
Speaker 1: Okay, so let's play a devil's advocate there. Yeah, we
Speaker 1: just discussed that on an average, On an average in
Speaker 1: the retail industry, online returns rates.
Speaker 3: Around ten percent. Yeah, ten percent.
Speaker 1: That means ninety percent of the paper print ink electricity
Speaker 1: going to that printing that label is never going to
Speaker 1: be used.
Speaker 2: Come on, is that really you really think it's the
Speaker 2: cost of printing the label? Come on, what's the cost
Speaker 2: of print a label for.
Speaker 3: A large retailer? It will cost you closer to million
Speaker 3: dollars every year.
Speaker 2: I know, But we care about one label. What's the
Speaker 2: cost of the print one label?
Speaker 3: But that's another good twenty five cents. But it adds up.
Speaker 3: Everything adds up.
Speaker 2: Listen, there's a dial that companies can turn of like
Speaker 2: make it really easy to return things, make it medium
Speaker 2: to return things, make it hard, right, and they would
Speaker 2: be dumb not to think about the behavioral responses to
Speaker 2: the things they're doing. Right, Truly, that's part of the calculation.
Speaker 1: Absolutely, But you know it's not either are you know
Speaker 1: you want to keep the label inside the box? Great,
Speaker 1: but oftentimes consumers will throw that packaging label and then
Speaker 1: a few days later they want to return it.
Speaker 3: Where do they go?
Speaker 1: They still need somewhere online to now get a QR
Speaker 1: code or something to go handle there.
Speaker 2: I feel like you're big an apologist for companies that
Speaker 2: make it hard to return things. I thought you'd be
Speaker 2: on my side on this.
Speaker 1: One, and all I'm saying is beyond the products you're selling.
Speaker 1: What kind of value add services and experiences you are offering,
Speaker 1: Especially in our discussion, the same pair of Nike shoes
Speaker 1: you can buy in half a dozen places. Where is
Speaker 1: the company's value proposition there? That's the biggest question besides
Speaker 1: the price. We discussed price is one key lever outside
Speaker 1: of the price, where else otherwise it's race to the bottom.
Speaker 3: Right, So you know that's the question.
Speaker 1: So our piece is that, I know, using the technology
Speaker 1: and then figuring out where do you want to actually
Speaker 1: craft your policies, Whether you want to make it, you know, difficult,
Speaker 1: or you want to make it more reasonable or extremely convenient. Right,
Speaker 1: all those things are there, but underlining factor remains and
Speaker 1: which is you you're calling out it costs money?
Speaker 2: After the break, Amazon, Now back to the show. I've
Speaker 2: thought of Amazon a lot in this conversation. You you
Speaker 2: have done a lot for returns, you have a lot
Speaker 2: of big clients. But Amazon is also very impressive in
Speaker 2: terms of returns. What's something you've learned from watching and
Speaker 2: in some ways competing with Amazon?
Speaker 3: First off, we don't compete with Amazon.
Speaker 1: We love Amazon because they set the standard and we
Speaker 1: want to make sure we can democratize those standards and
Speaker 1: giving that back choice and convenience for everybody. So it's
Speaker 1: a level playing fields for all the brands and retailers
Speaker 1: that they can leverage.
Speaker 3: So there's nothing that we can do that, you know.
Speaker 2: So you go to your clients and say, do you
Speaker 2: want to be as good as Amazon on tracking and returns?
Speaker 2: We can do that for you.
Speaker 1: And nine out of ten conversations are, hey, I already shop,
Speaker 1: I'm already a Prime member, and how do I offer
Speaker 1: same similar services to my customers? So that's that is
Speaker 1: absolutely absolutely the case. I mean the other piece I'm
Speaker 1: saying that, you know, it's very impressive to see Amazon
Speaker 1: offering these returns services at scale, not only just in
Speaker 1: the US, they operate globally, right so, and it's just seeing,
Speaker 1: you know, how you can offer these kind of programs.
Speaker 1: It just has been quite impressive.
Speaker 2: You know how hard it is. You truly know how hard.
Speaker 3: It is to do. Absolutely absolutely, So.
Speaker 2: I feel like there's an interesting maybe and maybe I'm
Speaker 2: kind of reaching here, but there's like this bigger macroeconomic
Speaker 2: idea that I'm curious about here, which is we've just
Speaker 2: lived through this call it ten year period, you know,
Speaker 2: basically the teens of zero interest rates, incredible inflow of
Speaker 2: capital to tech companies, including e commerce companies, growth above
Speaker 2: all else. Right, So this is a universe I feel
Speaker 2: like where online retailers are just throwing free returns at
Speaker 2: us and free shipping and they just want you to
Speaker 2: buy and they don't care if you return. And so
Speaker 2: the high costs of free returns could be absorbed in
Speaker 2: that era. Now we're in this new era when interest
Speaker 2: rates are not zero, when lots of tech companies have
Speaker 2: become more interested in profits relative to growth. And so
Speaker 2: I'm curious now that we've all been trained to just
Speaker 2: expect free returns whenever we want it, Like our company
Speaker 2: is going to stop giving us free returns now.
Speaker 1: I can tell you hands down returns. This top of
Speaker 1: mind for all the retailers. So now the question comes,
Speaker 1: how do they actually really think about from the P
Speaker 1: and L perspective, not just the consumer experience perspective.
Speaker 3: How do you bring the P and L perspective to
Speaker 3: really do that and.
Speaker 1: All profit and loss absolutely, Now, whether they're going to
Speaker 1: make it harder, are they going to actually.
Speaker 3: You know, charge more to the consumers?
Speaker 1: I can make it, you can return it, but it's
Speaker 1: going to cost you, right, That's where the conversation is
Speaker 1: going to go.
Speaker 3: And that is what exactly is happening in the market.
Speaker 2: So it is more retailers are in fact charging for
Speaker 2: return that is true. Are there ways the world of
Speaker 2: returns might look significantly different in five years in terms
Speaker 2: of how we can return stuff, what it might cost,
Speaker 2: the technologies you know, on the on the back end,
Speaker 2: what might be different.
Speaker 1: In next three to five years out as we see it.
Speaker 1: And that's not a typical that's a very common consumer
Speaker 1: surprise factor, but they do not know the impact and
Speaker 1: the you know, the size of returns economy where we
Speaker 1: see that transparency is needed for creating that education and
Speaker 1: awareness what happens to returns when they are sent back.
Speaker 3: So consumers are being a little bit more mindful, you.
Speaker 2: Mean, companies are going to try and talk us out
Speaker 2: in a nice way of returning so much stuff. Companies
Speaker 2: is gonna be like, do you really really are you
Speaker 2: sure you want to return those shoes? You can't, but
Speaker 2: think about it, like, is that what you're saying?
Speaker 1: Maybe if consumers are aware of how much they buy,
Speaker 1: how much that goes into landfill, how much is actually
Speaker 1: circulated back in the economy, and that's where there has
Speaker 1: to be certain areas. I believe in next three to
Speaker 1: five years there will be more transparency. Education awareness is
Speaker 1: needed in this whole area of returns and exchanges.
Speaker 2: Well, I mean, if you really want to make a
Speaker 2: sustainability argument, the argument is buy less stuff. But I
Speaker 2: don't think the ecover sites are going to give us
Speaker 2: that one.
Speaker 1: Well, you are correct, but there are example is Patagonia.
Speaker 2: Yes, Patagonia is an atypical company, which, by the way,
Speaker 2: charges for return.
Speaker 1: That's right, you know, twenty five years ago Zappos was
Speaker 1: atypical and here we are. So we need more companies
Speaker 1: like Patagonian others who are atypical now to create that
Speaker 1: education and awareness in the market. Whether that changes the
Speaker 1: consumer sentiment or not in a we all will find
Speaker 1: out in five years time. But all I'm saying is
Speaker 1: that if you want to change that equation in a
Speaker 1: meaningful fashion, we need to have a much, you know,
Speaker 1: much broader discussion with consumer base.
Speaker 2: Interesting. So it's like the pendulum has been swinging for
Speaker 2: twenty years towards just return return, free returns, easy to return.
Speaker 2: You're saying the pendulum is already starting to swing the
Speaker 2: other way. Don't return so much stuff. Maybe we're going
Speaker 2: to charge you if you return your stuff. You should
Speaker 2: really think about the environmental impact of returning your stuff.
Speaker 2: The pendulum is going to keep swinging away, and we'll
Speaker 2: return less stuff in five years, perhaps a smaller percentage
Speaker 2: of the stuff today returns.
Speaker 1: And as you mentioned, there's a hidden cost of returns
Speaker 1: which is not transparent. So why won't we have a
Speaker 1: transparent conversation. You're getting a service and in exchange right now,
Speaker 1: there's a hidden fee of exchange. Why wouldn't we make
Speaker 1: it much more open and transparent about it. That's what
Speaker 1: I'm saying about on that dobby.
Speaker 2: So, so returns aren't free now. They're included in the price,
Speaker 2: and people who return a lot of stuff drive up
Speaker 2: the price for everybody. Exactly if you had to pay
Speaker 2: for returns, then it would be way more fair.
Speaker 3: That's right, right, So, and again is this the show.
Speaker 2: Where we're declaring Can we declare the end of the
Speaker 2: free returns era? Can we say that it's over?
Speaker 1: I would say for sure, twenty twenty three will be
Speaker 1: the end of free returns era?
Speaker 2: Wow?
Speaker 3: Yeah, absolutely, without a doubt.
Speaker 2: Okay, okay, we'll be back in a minute with the
Speaker 2: lightning round. Back to the show. Let's close with the
Speaker 2: lightning round. I'll let you go very soon. What's the
Speaker 2: last thing you returned?
Speaker 3: Last thing that I return? Actually, you know it's a
Speaker 3: pain up shoes that just didn't fit.
Speaker 2: What's the worst possible thing I can return from the
Speaker 2: point of view of the company, Like, what's really bad
Speaker 2: for companies if I return?
Speaker 3: If you return.
Speaker 1: A dining table or a couch or a much bigger item,
Speaker 1: it requires not only a you know, a lot of
Speaker 1: coordination to come and pick it up, but you know
Speaker 1: it costs even a lot more money as well.
Speaker 2: What's one thing you learned working at Apple.
Speaker 3: Maniacal focus on the finest details.
Speaker 2: What's one thing you learned working at Walmart?
Speaker 1: I mean the true league adding value and that's in
Speaker 1: their tagline, you know, save money, Live better.
Speaker 2: One more question and this one goes back, goes back.
Speaker 2: Aways in your career in the original dot com boom,
Speaker 2: you you started a startup that failed, and because you
Speaker 2: were on a work visa at the time, you basically
Speaker 2: had to go back to India. You wound up going
Speaker 2: back to India and I'm curious. Was it a hard
Speaker 2: call to come back to the US after that?
Speaker 3: No, honestly, it was not a hard call.
Speaker 1: I mean, and back in two thousands and and and
Speaker 1: even now, you know all the technological advances and an entrepreneurship.
Speaker 3: I mean, the US has been in the forefront of it.
Speaker 1: So if you want to learn something or make a difference,
Speaker 1: US is the land of opportunities, at least in the
Speaker 1: in the world that you know we are in commerce
Speaker 1: and technology or or any kind of startup work.
Speaker 2: Amate Sharma is the founder and CEO of Narvar. Today's
Speaker 2: show was produced by Gabriel Hunter Chang and Edith Russolo.
Speaker 2: It was edited by Sarah Nix and engineered by Amanda k. Wong.
Speaker 2: You can email us at problem at pushkin. You can
Speaker 2: find me on Twitter at Jacob Goldstein. I'm Jacob Goldstein.
Speaker 2: And we'll be back next week with another episode of
Speaker 2: What's Your Problem.