Redefining Returns: Leading with Exchanges with Loop’s Founder and CEO Jonathan Poma
Returns are an absolute hassle—both for DTC brands and customers; they’re costly, they’re time-consuming, and they’re really confusing. But, what if there was a way to simplify returns, retain more revenue, and win customers back?
How to Win Customers Back via Returns with Loop's Jonathan Poma
Returns are an absolute hassle—both for DTC brands and customers; they’re costly, they’re time-consuming, and they’re really confusing.
Aside from fragmented returns logistics, what’s even more frustrating is that brands are leaving money on the table. But, what if there was a way to simplify returns, retain more revenue, and win customers back?
As an automated exchange-first returns platform, Loop transforms the post-purchase experience by making returns less of a hassle for everyone. By encouraging exchanges over refunds, Loop connects customers with products they love and helps DTC brands scale revenue.
In July, they raised $65 million in Series B funding from CRV, Shopify, and Renegade Partners, as well as existing investors. Used by Madhappy, Brooklinen, and Allbirds, Loop is on a mission to change ecommerce for the better.
Here at Tydo, we sat down with Loop Founder and CEO Jonathan Poma to learn more about how they’re redefining returns as a profit center and winning customers for life.
Loop’s Origin Story
What was the unique insight that led Jonathan to start and build Loop?
As a consultant, Jonathan worked closely with the Chubbies team. One day, the Chubbies VP of Finance called to chat about some returns issues. Going through the step-by-step return process, he saw firsthand the messiness and fragmentation of the entire experience.
At the time, in 2017, Chubbies’ returns process was 100% manual—a significant time suck for customers and customer service agents. Even with a strong customer experience team, returns weren’t scalable.
Using this insight as a catalyst, Jonathan started brainstorming possible solutions to their returns problem.
A week later, he shared his plan with the Chubbies team.
“We showed our idea to the team, and they were like ‘this is incredible,’” said Jonathan.
Alongside Kyle Hency, then-Chubbies CEO and future Loop cofounder, the two developed a software company and grew their list of clients year after year.
But, it wasn’t until the recent ecommerce boom that Loop gained its most significant traction.
Today, their platform supports over 1,100 brands.
“In 2017, we were still convincing people that returns actually meant something. We didn’t realize the scale of the opportunity until 2019.”
A Major Refresh: Giving Returns a New Look and Feel
Instead of viewing returns as a cost center, Jonathan sees them as a profit center that allows brands to earn customers’ trust and to build their lifetime value.
In fact, one of Loop’s core beliefs is that returns don’t equal refunds.
Loop’s technology helps brands encourage customers to take store credit and make an exchange rather than opting for a refund. In addition, Loop’s platform speeds up the entire returns process, making it as seamless as possible for both brands and consumers.
“As a brand, you’re always looking to save time and resources and shorten the return cycle,” said Jonathan. “That’s in part because the customer who gets their refund or exchange in 10 days is going to be a whole lot happier than if it took 60 days.”
Breaking down the costs behind returns helps brands understand the impact they have on their bottom line.
“If I have 1,000 returns a month and I'm paying $7 per shipping label to send the exchange out to the customer and $7 to take the exchange back, that’s $14 on 1,000 returns. That's $14,000 a month! That's a big problem,” said Jonathan.
“And, that’s only for a small business. Larger brands handle more than 10,000 returns a month,” he added.
“Let’s take this challenging moment where the product doesn’t meet the customer’s expectations and turn it into a shining experience to help them find a product they love.”
How to Create Memorable Customer Experiences via Returns
What are some of the top mistakes brands make when it comes to returns?
Jonathan says the COVID-19 pandemic—and the accelerated growth of ecommerce—caused him to reevaluate his views. In pre-Covid times, missed opportunities came in the form of brands not investing in returns or trying to eliminate them altogether.
Now, brands have all the data they need to gain deeper insight into the return cycle—both on a product and customer level. It’s all about finding the right opportunity and capitalizing on it.
Most modern brands watch sales velocity, but the best brands monitor sales velocity and return or exchange velocity.
Some of the best Loop merchants use this data to better understand their product quality, which products are most likely to be successful, and products to reorder sooner.
The shorter the time it takes for a customer to move from a return to the next action (purchase or exchange), the better the customer experience will be. Brands should see this as a chance to satisfy and nurture customer relationships.
“By tracking analytics and data, brands have a unique opportunity to make better decisions related to merchandising, buying, and inventory planning.”
The Future of Ecommerce: Consolidation
In 2019, about 100% of Loop packages shipped from customer to warehouse. Jonathan expects that number to drop, especially as reverse logistics pick up steam.
The alternate flow will soon become the primary flow. Similar to how warehousing and 3PLs moved into forward logistics, they’ll soon enter the reverse logistics space.
Plus, Jonathan believes the average distance a package travels will be greatly reduced in the upcoming year.
“We’ll see consolidation increase and sustainability become more of a focus. If everything is shipped to one place, there’s less freight and a lower carbon footprint,” said Jonathan.
“There’s going to be a meaningful shift into a world of commerce where a lot more happens during the post-sale of a product. New opportunities and marketplaces will spin up.”
- What to pledge
- How to improve
- Which tools will set you up for success
I think the most important thing brands can do in 2023 is to better manage their customer data—both ethically and effectively. There’s an opportunity for brands to know their customers better than ever before—a clear benefit for both the customer and the brand. When you manage your data correctly, you’ll create stronger and more personalized ads, creative, site experiences, and so much more.
This is a classic: Let the data guide you. Go where the buyers for your products are and communicate with them on a personal level (i.e. by persona and funnel position) and nurture those relationships (past, present, and future customers). It’s possible—all through data.
We recommend that Shopify brands analyze and update their websites using data-driven decisions. Using analytics tools such as heatmaps and scrollmaps can help brands better understand how customers are interacting with their store.
Store owners tend to make assumptions about the way customers interact with their website. Most never go back and analyze their design choices to find pain points or areas of opportunity. By using heatmaps and scrollmaps, they can see where real customers are clicking and concentrating their attention. Leveraging this data, brands can start to iterate on design and make their online store experience streamlined and intuitive.
Hotjar provides a simple way to implement heatmaps, scrollmaps, and recorded user sessions on your site, helping you acquire incredibly informative user data. Additionally, it gives you the ability to create on-site surveys, which allows you to obtain direct and often critical feedback from users about their experience.
Test various attribution models and analyze the impact on your business. At Fifty Six, we are always here to help our clients identify and optimize their approach—a critical step in any successful marketing strategy.
If I’ve said it once, I’ve said it a million times–Customer Lifetime Value. And even more importantly, Future Lifetime Value (FLTV). With the ever-growing importance of first-party data, it is crucial that brands take a good look at their CRM and FLTV metrics.
OrderlyEmails is our go-to tool for transactional emails. It helps us level up our brands’ email aesthetics with customizable, quick-to-implement Shopify templates.
Lately, I’ve been really interested in Smile.io’s loyalty platform. Their UX is fantastic for teams with low bandwidth!
Stop allocating budgets to low-hanging fruit that doesn’t move the needle on conversion. Think about what’s really going to improve your CX and the return of undertaking different initiatives—not just on what’s top on your list of bugbears on the site!
One of the best ways to understand your customer behavior is by using HotJar. Their heat-mapping and screen recording tools shine a light on where customers are navigating to and from on your site, where they're rage clicking and experiencing frustration, and where conversion is dropping off within real life customer journeys and flows!
Understanding your customers’ pain points via data and analytics , will allow you to work with your CRO/CX Agency to solve customer frustrations and improve conversion.
Rewind backs up all product, customer, and order data for Shopify sites—essential since Shopify itself doesn’t provide this solution. It's saved so many of our clients time and money from administrative accidents.
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33% of customer service inquiries are pre-sale questions. What does this mean? If you’re not investing in customer service, you’re missing out on revenue-generating opportunities.
The benefits of elevating your customer experience:
- 10% to 25% increase in AOV for customers who engage with live chat pre-purchase
- 21x higher conversion rate for customers who reach out via Live Chat or SMS compared to other site visitors
- 87% of customers who have a great customer experience will make another purchase
- 72% of customers share positive experiences with 6 or more individuals
Gorgias is our favorite Helpdesk platform. They can reduce costs by 35%, primarily by decreasing the average ticket handle time. Their machine learning algorithms are trained on millions of ecommerce-related interactions across Gorgias’ customer base and provide accurate, automated replies for the most common ecommerce inquiries. This helps our agents resolve tickets faster, which provides the customer a seamless experience.
Trust your agency! Agencies do the same things across multiple brands and niches, so we see the trends and have the practice and experience!
Don't be afraid of data and insights. If customers aren't clicking on your emails, try a new CTA. If your ads are driving good metrics at a small spend, start scaling. If your customers are complaining about a product, look into QA! If the data tells you something isn't working, let it go and try something else!
I'm supposed to say Tydo, right? 😉
Double down on differentiation. There will be a lot of headwinds this year and standing out from the crowd will set you apart.
A picture is worth 1,000 words. A video? Probably millions. In ecommerce that value translates into engagement, acquisition, and retention—everything you need to impact your bottom line.
At soona, we've seen the we've seen the impact of creative and the continuous split testing of it yield results. Our resolution is to challenge ourselves and double down on innovation and creative optionality so that each brand we work with can distinguish themselves in a crowded sea of D2C ecomm. We'd love to see our brands share this resolution and keep pushing the creative limits.
Klaviyo. We're using it to power our email and newsletter at soona too!
Optimize your returns strategy! This can lead to valuable customer insights, enhanced user experiences, and increased revenue and customer loyalty.
Brands need to dive deeper into understanding their customers to set themselves up for success. Conduct research to gain insights into customer needs, preferences, and behaviors. By doing so, you can develop targeted strategies that will enhance customer experience and boost overall retention.
Right now I would say Gorgias. Having a good customer service tool is crucial to building strong customer relationships.
Start paying heavy attention to data, specifically around retention. We see a lot of effort put towards acquisition with the assumption that once someone buys, they are your customer forever. Instead, get to know your customer, understand their needs, and analyze their behaviors once they are on-site and judge their sentiment after they have visited. Work with a retention focused and data-driven agency to implement tools that contribute to repeat business and customer delight. It will pay dividends.
When surveyed, about 80% of ecommerce merchants think that they are delivering a great experience to their customers. However, when the same customers are surveyed, only 8% of those customers think that they are getting a great experience from the merchant. Now, more than ever, retaining loyal customers is an essential part of any online business and you should spend time with your customers to judge their experience with your website and products and offer improvements based on that feedback.
Tydo's report cards are an essential tool, along with Klaviyo for email and SMS, Recharge for subscriptions and memberships, Okendo for reviews and surveys, Rebuy for AI driven collections and upsells, Loop for self service returns... each tool is great on their own, but their strength as the ultimate tool comes from when they are used together!
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Discover metrics for every team member so they can stay updated with the right data on a daily, weekly and monthly basis.
It's free because we believe everyone should have access to the basics.
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More about the project
Here at Tydo, we try to highlight DTC founders who run their business in various ways. And, that's because there's no "right" way to run a DTC brand.
This project illustrates exactly that. Whether it's how a founder supports their team or how they talk about mental health in the workplace, every founder has a different approach. How do they discover these different approaches? One way: reading. Discover the greatest books that have changed the way 15+ founders think about or operate their business.
You can also listen to these book picks on Spotify or Anchor.fm.