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.”
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