Dive Brief:
- Returns optimization software provider Optoro has raised $75 million in an equity funding round, the company announced in a press release Monday. The round was led by Franklin Templeton and included additional financing from Revolution Growth, Generation Investment Management and Tenfore Holdings.
- Only a few Optoro retail customers have chosen to reveal themselves. Among them: Home Depot, Best Buy, Target, BJ's Wholesale Club and Jet.com, according to a Forbes report last year. The company has a strategic alliance with UPS to enhance retail reverse logistics services, according to a press release from UPS. The company said it plans to use the new capital for expansion, and research and development.
- Optoro's software assists retailers and brands in managing, processing and selling excess and returned inventory, the press release said. Over the past two years, the quantity of merchandise routed by its software has increased more than fivefold, according to Optoro.
Dive Insight:
Selling stuff is of paramount importance to retailers, but dealing with returns in an age of omnichannel sales, easy return policies, and try-before-you-buy services like Stitch Fix — and recently Amazon's Prime Wardrobe — can be a monstrous headache.
Besides the accounting issues involved with properly crediting customers, those returns have to be transported, directed to the right warehouse, sorted and then properly inventoried, re-sold either by the original retailer or a third party specialist, or given away. Every day, and especially after high-volume sales occasions like Amazon Prime Day and Black Friday, retailers experience a “tsunami” of returns, said Tony Sciarrotta, executive director of the Reverse Logistics Association in a recent interview with Retail Dive's sister publication Supply Chain Dive. Almost a quarter of returns occur during the holiday season, so Optoro's new funding is well-timed.
"Everyone is feeling the pain of returns," Joe Hsu, director of solutions at Optoro, recently told Supply Chain Dive. "If anything, suppliers have it the worst. They have all the stuff coming back through the retail and e-commerce channels, plus the goods coming back from the wholesale customers."
A related company, business-to-business marketplace B-Stock, recently obtained $65 million from Spectrum Equity to fund expansion. B-Stock's platform uses an online auction process where retailers and manufacturers can sell returned, excess and other liquidation inventory directly to a global base of approved business buyers.
The rate of returns is growing almost 10% year to year, Ted Leonsis, partner in Revolution Growth and an Optoro Board member said in the press release announcing Optoro's funding round. Optoro intends to use the new funding to expand use of its platform with retailers and brands, and invest in research and development, said Tobin Moore, CEO and Optoro cofounder.
"The retail industry has a major problem — returns create tremendous financial, operational, and environmental waste,” Moore said. Each year, over 2 million tons of retail returns are destined for landfills, which are already near capacity, and contributing to environmental problems like groundwater contamination and greenhouse gas emissions, said the Environmental Capital Group. U.S. customers returned 10%, or $351 billion, of the $3.5 trillion spent on merchandise in 2017, according to NRF numbers reported by Appriss Retail.
In this environment, returns optimization, such as that offered by Optoro's software platform, becomes all the more essential. Optoro's platform determines the ideal path for each product sent back while it maximizes recovery, lowers processing costs, and reduces environmental waste, the press release said. The Optoro platform is now in use at 20 U.S. sites, with 10 more planned this year, reported the Wall Street Journal.
