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Retail Technology Provider Narvar Targeting The Costly Returns Process

Investment will back development of e-commerce software as retailers look to improve consumer online experience. Retail Technology Provider Narvar Targeting The Costly Returns Process

Retail technology provider Narvar has raised $30 million in new funding to back what the company says will be aggressive expansion of a business that supports e-commerce platforms for companies including Costco Wholesale Corp., Gap Inc. and Levi Strauss & Co.

The new funding round, led by venture capital firm Accel with Battery Ventures, Salesforce Ventures and Scale Venture Partners, brings the company’s total raised to $64 million since the business launched in Silicon Valley in 2012. Narvar said the funding will support refining its technology, which is helping retailers manage deliveries and returns for online orders, and an expansion into Asia and Europe.

The company says its technology supports 500 retailers, helping their online sales platforms offer services similar to those at Amazon.com Inc. Narvar Chief Executive Amit Sharma said it handles “all aspects of post-purchase customer engagement and messaging,” and that demand for its technology has increased, particularly on the returns side, as digital commerce has grown.

“As consumers shop more and more online, free returns is part and parcel of their expectations,” Mr. Sharma said. “Both for consumer experience and operational efficiencies, this part of the business needs be able to be solved pretty quickly.”

The growth of Narvar and other e-commerce tracking and returns technologies highlights how deliveries and reverse logistics have become more important to retailers’ customer service strategy. Surveys have found customers are more likely to shop again at an online retailer after an initial purchase if it’s easy for them to track shipments and return purchases.

The National Retail Federation said holiday sales reached nearly $692 billion in November and December. About 13%, or $90 billion, is expected to be returned through the end of February, according to a forecast by Optoro Inc., a logistics provider that helps companies like Target Corp. , Staples Inc. and BJ’s Wholesale Club Inc. take back and resell returned merchandise.

According to a Forrester research report, U.S. internet retail sales are expected to reach almost $540 billion this year and grow 11% annually over the next five years to account for one-fifth of all retail sales by 2023.

Dale Rogers, a logistics and supply chain professor at Arizona State University, said Narvar’s software improves the online shopping experience while providing retailers with better information about their customers. For example, Narvar’s software could catch shoppers who return items frequently, highlighting potentially fraudulent behavior, Mr. Rogers said.

“It’s clever,” he said. “You can really track what your customers are doing.”

Software startups aiming to solve common logistics problems have drawn millions of dollars of venture-capital funding as e-commerce has ballooned. According to industry tracker PitchBook Data Inc., logistics startups drew $404 million in new funding last year, more than twice the previous peak of $185 million in 2015.

‘Customer expectations have fundamentally changed, driven in no small part by Amazon.’
—Charlie Cole, chief digital officer for Tumi.

Several third-party software and logistics companies are targeting the costly returns process. Optoro Inc. recently raised $75 million to expand its development and sales in services known as reverse logistics. Optoro estimates the annual U.S. market for customer returns is $380 billion and growing.

Charlie Cole, chief digital officer for luggage brand Tumi, a Narvar customer, said shipment tracking and better communication after an online sale can help inspire confidence in a brand.

“Customer expectations have fundamentally changed, driven in no small part by Amazon,” Mr. Cole said, and brands have to do “anything they can to, at the very least, level the playing field for after-sales service.”

The Stores That Track Your Returns

J.C. Penney, CVS, Sephora among retailers using Retail Equation to generate customers’ ‘risk score’

More consumers are finding out that stores are using a third-party service to monitor their shopping behavior and limit the amount of merchandise they can return.

Best Buy Co. has been the target of a large share of consumer complaints on Facebook, Twitter , Yelp and other online forums about its efforts to police returns with the help of a firm called Retail Equation. But the same service is used by a variety of other retailers, including J.C. Penney Co., Sephora, CVS Health Corp., Advance Auto Parts Inc., Dick’s Sporting Goods Inc., Home Depot Inc. and Victoria’s Secret. Some only penalize shoppers if they bring back merchandise without a receipt, while others also ding them for receipted returns.

The Wall Street Journal previously reported that Retail Equation develops a “risk score” on each customer based on their shopping behavior, then sometimes issues warnings and denials. The firm, based in Irvine, Calif., receives information about shoppers when they provide a form of identification to retailers.

The actions that hurt a shopper’s score and the thresholds for getting declined from making future returns vary by retailer and often aren’t disclosed in their policies. Behaviors that can harm a score include returning a large percentage of purchases in a short period and bringing back items that tend to get stolen at that retailer.

Retail Equation said its system is designed to identify 1% of shoppers whose behaviors resemble return fraud or abuse, which occurs when customers exploit the return process, such as requesting a refund for items they have used, stolen or bought somewhere else. The firm said it doesn’t share a person’s data from one retailer with another.

U.S. retailers lost more than $351 billion in sales last year due to merchandise returns, and an estimated $22.8 billion of that came from fraudulent and abusive returns, according to a report by Appriss Inc., a Louisville, Ky., data analytics firm that acquired Retail Equation in 2015. The company said it used a recent survey conducted by the National Retail Federation to determine the losses. The rise of Amazon.com Inc. has compounded the problem because more shoppers expect to be able to send back online orders with little resistance.

Sue Tillman, 55 years old, of Guilderland, N.Y., said she buys clothes in different styles and sizes online and brings back the extra items at the retailer’s physical store. Over the years, she said she has made dozens of returns at J.C. Penney, but has also spent thousands of dollars there. “They are the ones that encourage you to buy online and return in the store,” she said.

Ms. Tillman, a social worker, said she received a warning in August from Retail Equation when she tried to return men’s shirts at the Penney store in nearby Albany. She said she had a receipt and was following the store’s guidelines. After returning one, she said a salesperson told her she would be denied from making returns for 60 days and advised her to contact Retail Equation to request her so-called return activity report, a history of her transactions.

Her report reveals the firm has been keeping track of her shopping behavior for at least seven years. Since the start of 2017, Ms. Tillman returned 10 other items at Penney, each with a receipt, according to the August report, which was reviewed by the Journal.

At J.C. Penney, returning too many items or bringing back products that tend to get stolen such as cosmetics can hurt a shopper’s score. Penney uses Retail Equation to help prevent fraudulent or abusive returns, but the system doesn’t “impact the vast majority of day-to-day transactions,” said spokesman Joseph Thomas.

While most retailers don’t publicize their relationship with Retail Equation, many disclose in the their return policies that they work with a third party.

“When we identify excessive return patterns, we notify those customers that we may limit future returns or exchanges if no proof of purchase is provided,” said a Sephora spokeswoman.

Victoria’s Secret reveals the thresholds for returns on its website. At the lingerie retailer, owned by L Brands Inc., shoppers can make up to seven returns in a 90-day period and bring back $250 of merchandise over the same time frame without a receipt.

Home Depot said it only uses Retail Equation to track returns with no receipt.

CVS started using Retail Equation last year, and about one-third of 1% of returns have been declined at its stores since, said CVS spokesman Mike DeAngelis. “Similar to other major retailers, we reserve the right to decline to accept a return even if accompanied by a receipt if it does not pass our third-party verification,” he said.

Robert Berardino, 43, a technology manager from Millersville, Md., said he learned about Retail Equation for the first time in February when he went to Dick’s Sporting Goods in Gambrills, Md., and tried to return three items his wife had purchased online.

He said he brought a receipt but he received a warning notice after the first return, a pair of shoes. Dick’s Sporting Goods didn’t respond to requests for comment.

“It was insulting,” he said.

Updated: 12-21-2019

Retailers Brace for Bigger Holiday Returns Season

Bricks-and-mortar outlets refine their in-store handling of returns as surging e-commerce sales push more goods into burgeoning reverse logistics networks.

Shoppers may love ordering stuff online, but when it comes to returning that holiday sweater, many would rather drop it off at the store.

That consumer aversion to shipping back unwanted goods could give bricks-and-mortar retailers an edge in the post-holiday hangover even as online sales continue to soar.

Consumers are expected to return between $90 billion to $95 billion worth of merchandise purchased over the holidays, according to B-Stock Solutions, which runs online liquidation sites for major retailers. That is a projected jump of 15% to 20% over 2018, and e-commerce orders are likely to account for nearly half of this year’s volume.

Many of those rejects will get dropped off at the sales counter as store owners refine their ability to handle consumer returns. For retailers, that can mean another crack at landing a sale.

“It’s a qualified customer walking in the door with what amounts to a gift card,” said Bryan Eshelman, a managing director in the retail practice at consultants AlixPartners LLP.

Some 39% of U.S. online shoppers “often return items directly to a store,” according to a 2019 survey by United Parcel Service Inc. The package carrier forecasts consumers will return more than one million e-commerce packages a day through its network this month, with volume spiking the week before Christmas and peaking on Jan. 2 at an estimated 1.9 million packages.

Big-box stores like Target Corp. and Walmart Inc. are increasingly allowing shoppers to return online orders at stores, while Walgreens Boots Alliance Inc. and Nordstrom Inc. are testing pickups and returns of orders from other brands and retailers. Some mall chains and specialty retailers charge customers for return shipping, Mr. Eshelman said, but allow in-store returns at no charge to drive more traffic.

About 80% of shoppers prefer returning or exchanging items in stores, and nearly three-quarters say they are likely to buy something else in the process, according to a National Retail Federation survey released this week.

Catering to those customers is becoming more important as businesses look for ways to blunt the costs of what is known as reverse logistics. Some unopened items may be put back onto store shelves, but many end up being liquidated through online auctions and other secondary channels.

Generous return policies at Amazon.com Inc. and big-box retailers are also reshaping consumer expectations.

“Every year these policies get more and more liberal,” said Norman Brouillette, vice president of operations for Ryder System Inc.’s supply chain division, whose customers include retailers. “What we’re hearing from our customers is they are expecting to see a significant increase this year in returns” as e-commerce sales grow.

The stakes are particularly high for clothing and shoe companies. Shoppers routinely order multiple items online, try them on at home and send back items that don’t fit. E-commerce orders can have about triple the return rate compared with in-store purchases, said Tobin Moore, chief executive and co-founder of Optoro Inc., which helps retailers manage and process returned items.

Shoppers also factor return policies into buying decisions. Some consumers prefer in-store returns because they get faster refunds, according to a 2019 consumer survey by Narvar Inc., a digital-retail software and technology company. Nearly a quarter of respondents say that having to repackage an item is one reason they dislike the returns process.

“People expect ultimate convenience, and packing tape and packaging is annoying,” Optoro’s Mr. Moore said. “Having to have a printer, if you have to print out a label, that’s also a hassle.”

Even e-commerce merchants are coming up with more ways for consumers to return digital purchases to physical locations.

Amazon offers no-cost returns at more than 18,000 drop-off locations that include its small chain of physical book stores, select Whole Foods Markets and third-party locations such as Kohl’s Corp. and UPS stores.

Santa Monica, Calif.-based startup Happy Returns has built its business on handling in-person returns for digital brands such as Everlane and Rothy’s at more than 700 kiosks in malls and stores around the country.

Updated: 12-26-2019

Holiday Season Package Returns To Hit A Record High, UPS Says

Key Points

* United Parcel Service Expects Returned Packages To Hit A Record High Following This Year’s Holiday Shipping Season, As Consumers Shopped More Online.

* E-Commerce Sales Rose 18.8% Year-On-Year And Comprised 14.6% Of Total Retail Sales.

* Ups Said It Expects To Process 1.9 Million Returns On Jan. 2.

United Parcel Service expects returned packages to hit a record high following this year’s holiday shipping season, as consumers shopped more online, the package delivery company said on Thursday.

UPS said it expects to process 1.9 million returns on Jan. 2, up 26% from a year earlier and a seventh-consecutive annual record.

“This process is a change from years past, when consumers would rush to physical retailers the day after Christmas and stand in long lines to make returns,” UPS said in a statement.

U.S. shoppers spent more online during this year’s holiday shopping season, a report by Mastercard Inc showed on Wednesday, as e-commerce sales hit a record high.

E-commerce sales rose 18.8% year-on-year and comprised 14.6% of total retail sales, according to Mastercard’s data tracking retail sales from Nov. 1 through Christmas Eve.

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One response to “Retail Technology Provider Narvar Targeting The Costly Returns Process”

  1. […] are resorting to all sorts of data and scores to size up consumers and predict their behavior. Retailers use risk scores to try to limit merchandise returns and prevent e-commerce fraud. There are scores to measure the likelihood a person will become sick, […]

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