As online retailers continue to seek out ways to bridge the digital divide between themselves and their customers, Happy Returns, which provides physical locations for online shoppers to return and refund unwanted purchases, has raised $8 million to help.
The Santa Monica, Calif.-based company, raised its new money from U.S. Venture Partners along with previous investors Upfront Ventures and TrunkClub founder Brian Spaly.
“The market is really turning toward this idea of buy online and return in person,” says Happy Returns chief executive, David Sobie. “For a long time it was okay for returns to be this friction point in e-commerce… it’s no longer okay.”
In the intervening months since the company’s last financing in May, Happy Returns has added 50 locations in 14 cities to its network of return locations and added additional retailers.
For vendors, the Happy Returns value proposition is to take some of the cost and overhead sting out of managing their own returns. And with online sales, returns are a huge cost center and an obstacle to higher sales. Online apparel stores typically see return rates of 30% to 40%, according to Sobie.
According to a Forrester retail analyst report provided by the company, 85% of online shoppers are more likely to shop from stores that offer free, in-person returns with immediate refunds.
As Amazon expands its network of physical locations through the Whole Foods acquisition and its smattering of bookstores around the country, Sobie says its a validation of the thesis that he’s had for years.
With the new cash, Sobie said Happy Returns would begin experimenting with different types of redistribution — either sending items to liquidators, or to refill demand in existing stores, as well as adding refurbishing features to resell at outlets.
The company’s plan is also to expand the number of return locations it offers from 50 this year to 200 by the end of 2018.
Locations vary from the concierge stand at higher end malls to owner-operated boutiques. For malls and stores, the Happy Returns locations offer the benefit of additional foot traffic with a consumer that is primed to buy (since they just received a refund on their last purchase).
“We believe this is a uniquely qualified team capitalizing on market trends, and we are impressed with how efficiently they have scaled the business,” said Rick Lewis, Partner at USVP in a statement.