SBS S5 E2
April 6, 2021

[Step by Step] Can Product Returns Build My Brand?

Product returns can be a total pain. But what if brands used their returns to actually strengthen customer loyalty? In this episode of Step by Step, David Sobie, CEO and Co-Founder of Happy Returns and Zach Goldstein, CEO and Founder of Public Rec join the pod to chat about how returns can actually be painless for the brand and a good experience for the customer, driving their loyalty to your brand. Listen now!

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this episode sponsored by

Brian: [00:00:36] Hello and welcome to Step by Step, a podcast by Future Commerce, presented by Route. I'm Brian.

Phillip: [00:00:43] And I'm Phillip. And this is Season 5 of Step by Step. You are listening to Episode 2 of 5. So if you are just jumping into this series midway through, I suggest that you go back and listen from the very beginning. You don't want to miss a single thing. What are we covering this season on Step by Step, Brian?

Brian: [00:01:02] Well, the world is changing, Phillip.

Phillip: [00:01:05] That's right.

Brian: [00:01:07] {singing} Cha cha cha changes... That's what we're seeing right now. I'm actually not that old. I don't know why I referenced that.

Phillip: [00:01:13] {laughter} Where did that come from?

Brian: [00:01:14] I don't know. I don't know. But the world is changing in a really big way. And Amazon is driving most of that change through, at least in our world of commerce. Amazon is setting the bar for brands to have to meet new customer expectations. Amazon is manifesting out of nothing, it appears, {laughter} or just lots and lots of money that Jeff Bezos is sitting on. Or not. I don't know. I don't know where it's coming from. Whatever. However it's here. However it's here. Things are changing.

Phillip: [00:01:50] That's right. But the thing that is also changing is that the world around Amazon, like the outside of Amazon eCommerce ecosystem, has evolved and matured to where brands of all sizes can actually deliver on the Amazon level expectations that your customers have of you. So if you're a small or medium sized business, if you're a direct to consumer startup, if you're an independent retailer, or if you have a lifestyle eCommerce business, you can actually deliver at Amazon level. And we're going to teach you how to do that step by step in this season. We're on Episode 2 and today we are sitting down to answer the question, can product returns build my brand? And I loved... I learned so much in this episode, Brian. I learned what reverse logistics means.

Brian: [00:02:42] I've only heard it like two hundred times, and I'm like what?

Phillip: [00:02:46] You know that Parks and Rec mean where it's like you keep saying reverse logistics. And I'm like, at this point, I'm too afraid to ask what that means.

Brian: [00:02:55] Exactly.

Phillip: [00:02:56] I actually had someone tell me what it meant in this episode, which is great. But you're going to learn how important returns are to ensuring customer loyalty and retention. But you're also going to learn that you, your brand, you can have packages, printless returns. It's possible.

Brian: [00:03:17] Yes. That's so cool.

Phillip: [00:03:19] It's so cool. Any brand can have this. It's kind of amazing.

Brian: [00:03:22] I wish more brands had this. And that's why I'm so happy to see this episode come to life. And on this episode telling us this, we are about to listen to David Sobie, CEO and Co-Founder of Happy Returns, and Zach Goldstein, CEO and Founder of Public Rec. With that, let's dive right into the content. Today we have two guests with us, two incredible guests, David Sobie, CEO and Co-Founder of Happy Returns, and Zach Goldstein, CEO and Founder of Public Rec. Welcome, David and Zach.

David: [00:04:00] Thank you.

Zach: [00:04:02] Thanks.

Brian: [00:04:03] Super happy to have you.

Phillip: [00:04:05] Zach, I'm living in a post COVID leisure wonderland with Public Rec. Public Rec has personally outfitted at least part of it. I'm a big fan of the brand. This is a huge get for me to get you on the show. So thanks for coming.

Zach: [00:04:22] Oh, cool. Cool to hear. I appreciate you having me. I'm excited to talk.

Brian: [00:04:28] Yeah, whereas I only dress in formal wear. No, just kidding.

Phillip: [00:04:34] It has taken COVID black tie. It's very awkward. He's redefining what formal wear is in the new era. Well, in fact, there's a lot of redefinition that's been happening. And so I don't want to take anything for granted because I think a lot of people are just catching up and catching on. They're becoming more aware of new brands every day. Zach, tell us a little bit about Public Rec, and David, then we'll get over to you.

Zach: [00:05:03] Yeah, we're a leisure apparel brand. Started about five years ago. We started with the all day everyday pant. It's a nicer fitting looking pair of sweatpants that come in a waist and an inseam size. So they fit better. Yeah, I started the brand kind of to solve my own problem, sweat pants never fit me well, either being too long at the bottoms, too narrow the waist, always being baggy. And so I had the idea of how do we make a nicer fitting looking pair of sweatpants that you can feel good about wearing outside of the house? And that was really the start of the brand. And kind of how every garment has evolved since is really just updating your old sweats, whether it be sweatpants, sweatshirts, you know, old type of leisurewear and using new performance fabrics and nicer designs and fits. And yeah, it's been going well ever since.

Phillip: [00:05:57] Congrats on the success. And David, I hate to be that guy, but if you don't like your Public Rec, Happy Returns help send it back. Right?

David: [00:06:05] That's correct. Yeah.

Phillip: [00:06:09] Well, tell us about Happy Returns.

David: [00:06:12] So as you probably have guessed from the name, if you're not familiar with the company, we tackle the painful challenge of returning products purchased online. So our mission statement is and it's kind of a funny one, but we aim to make returns beautiful. And I always say similar to that old saying, you know, beauty's in the eye of the beholder, beauty means something different depending on who you are with regard to an eCommerce return. So if you're a shopper, a beautiful return is one that's friction free. There we enable box free contact, free drop off at a network of about twenty six hundred locations around the country. If you're a merchant, if you're like Zach in Public Rec, a beautiful return is well, it's one that doesn't happen, first. So there we try to convert refunds into exchanges to help brands retain more revenue. But either return or exchange, the item has to get back. And so beautiful return is one that's low cost. And then last we think about the planet, a beautiful return for the planet is one that doesn't involve cardboard, that uses the least greenhouse gas possible. And so there's a whole sustainability side to what we do, which is largely driven by shipping items in reusable totes rather than single use cardboard.

Brian: [00:07:35] Ooo I love that. What a beautiful way to look at returns. I actually happen to hate online returns. So this is all super compelling to me.

Phillip: [00:07:47] This is the guy who had like six mattresses last year.

Brian: [00:07:50] Yeah, it was awful. The worst. It was awful.

Phillip: [00:07:53] No cardboard was harmed in the returning of six mattresses.

Brian: [00:07:56] That's true. That's a good point. It wasn't. Well, today, I'm so excited to have you both on because we're talking about how a brand can compete with Amazon, here in this Season 5 of Step by Step by Future Commerce. And so are we in that age of Amazon versus the rest of the world? How do you as a brand think about Amazon today? And maybe how do you think your competitors and other modern DTC brands, like Public Rec, look at Amazon?

Zach: [00:08:27] As far as a product standpoint? We spend years focused on just one product to make sure it's different and better than what's out there today, and I feel like, at least for now, that hasn't been where Amazon is focused. [00:08:41] So from a competitive standpoint, at least today, we don't look at Amazon as competing with us in terms of the product offering. It's more so in the customer experience and the precedent that they've set for our customers. And, you know, Amazon's offering one or two days shipping for free, that's something that we have to be considering because here's what Amazon ships in, and can we beat that, match that? How does that work for our business? And so that's at least my perspective on how we think about Amazon as a competitor. [00:09:11]

Phillip: [00:09:11]  [00:09:11]And it's possible today, more now than ever before. It's more possible today than ever before to actually compete on those consumer expectations. Right, Zach? And what would you say is one of the harder parts of competing with that expectation? Is it shipping speed? Is it fulfilling on the product quality expectation? Give me a little bit of an insight onto how you have come to terms with the fact that your customers have expectations of you that you didn't set with them?

Zach: [00:09:47] Yeah, I think it's shipping speed for sure. How quickly will I get my product? I think it's how easy is the checkout experience? And how easy Amazon has made that. And some of that is a little bit out of my control, our brands control, at least for today. We use a lot of what Shopify has built for us, and Shopify has done a good job in their checkout experience. So we are a bit beholden to Shopify's checkout, which I think is good and getting better. And then we also look at the returns experience, of course, for sure. And I know we'll get to it at some point, but just partnering with Happy Returns was something that has really upgraded our return service and a partnership we've been super, super happy with.

Brian: [00:10:36] Definitely. I agree that that's a huge part of the benefit of Amazon is that returns process. David, I'd love to have you weigh in here as well. What role does Amazon play right now and how should brands be thinking about Amazon as they bring their products to market?

David: [00:10:55] Yeah, well, I think what Zach described in terms of Amazon setting sort of the service bar, I think is right. You know, the lens we view the world through is obviously returns and exchanges. And if you take a look at what Amazon has been doing over the last several years, it's really been driving shoppers to box free, in-person return drop off. So, I mean, just quick history lesson, we founded Happy Returns in the fall of 2015. We did the first box free in-person person return in April 2016. About 18 months after that, sort of Fall 2017, Amazon announced the partnership with Kohl's. And that was really an important moment for us in that it was Amazon kind of recognizing, "Hey, there's a better experience for shoppers that also is better for Amazon in terms of saving money to have shoppers bring items in person." Fast forward to today, if you go do an Amazon return today, what you'd find is four or five box free in-person options presented to you before any thought of printing a shipping label, right? They would say return it to Kohls or return it to Whole Foods or there might be an Amazon store near you or return it to the UPS store or even return it to an Amazon locker. All of that would be promoted first before any notion of print a label and send it back. So if you're a merchant competing today and Amazon is setting the service level, your box free in-person is essentially what they are promoting as the free option. And anything back via the mail would be something they're promoting as a paid option. So it's been good for our business in the sense that this is exactly the service offering that we invented, this is what we enable. And I think it's it's becoming table stakes for eCommerce, the same way free shipping outbound became table stakes, is this idea of a friction free process for shoppers.

Phillip: [00:13:09] And what's really interesting, and having used the service myself in an exchange, not of Public Rec. No, definitely not. But having used Happy Returns myself, is there is this really amazing blend of self service ability that allows me to actually choose an exchange and and to create an opportunity for myself to have another pathway to being fulfilled in making myself happy with the product. And so I do think that there's this unsung hero of that customer expectation of returns is that not all returns actually end in a return. Many times it's just trying to course correct or make an exchange for a different product. Create another opportunity for them to be happy and satisfied. And I think that that's so often overlooked in this conversation. I think that was a really brilliant point you made.

David: [00:14:11] I'm glad you brought that up. You know, we try through software to recreate the experience of walking in a store. And what we think about is like if you walked into a store to say, hey, I have a return to do, the store associate wouldn't respond by saying, great, "Here's your money back." The store associate would respond by saying probably something like, "I'm sorry it didn't work out. Why didn't it work out?" Because what stores are trained to do is to satisfy shoppers. And a return means something didn't work. And so maybe it's size related, maybe it's color related. But they would try to to collect some information from you as the returning customer to try to make sure you walked out with something. Well, we think about that exact same process, just via software. You know, when you come, the way our flow works is that the shoppers authenticate themselves. Typically, this is using an order ID and a zip code. They can select the items that they're returning. And then literally our software says, "Sorry, it didn't work out. Why are you returning it?" And then based on the input that they get, based on the return reason, we'll try to propose something they would want. And in the categories where we spend a lot of time, which are things like apparel and footwear, there are a lot of size related returns. There are a lot of color and style related returns. So, hey, I love the shoes, but they were too small. Well, software should be able to tell you if the next available size is available. And so if you were turning the 7s because they're too small and the 8s are available, well, make it easy. And that's really kind of what we're trying to do with regard to converting refunds into exchanges is just make it easy for shoppers. The same way, if you walked into a store, the store associate would try to make it easy for you to walk out with something.

Brian: [00:16:12] I love that term, make it easy, because I feel like that's everything that Amazon's ever try to do with online purchasing. They've tried to make it easy for customers, make it convenient for customers, make it fit into their lifestyle. And I think kind of going back to what Zach was saying about what's important when you're going to market and you decide to sell a part from Amazon or maybe in addition to Amazon and you build that own channel out and having that experience that customers can rely on, that feels comfortable, it feels easy. It feels like it's the experience that they want to engage in. And it's an experience that Amazon has sort of set for them and that they kind of expect better brands now.

Phillip: [00:16:58] I just want to interject there, too. You said "easy" a few times. I love that because easy is not brainless.

Brian: [00:17:05] Right.

Phillip: [00:17:05] Which is what I think a lot of folks feel like they have to index on having this really slippery checkout and where it's just going to force you down into buying something as soon as humanly possible. But they've sort of misconstrued the benefit of having a quick checkout. It's got to be easy, but it doesn't have to be mindless.

Brian: [00:17:26] That's a really good point. So what I think I'm hearing is that it's not just about product, it's about experience, overall experience. Right? And that experience is being made possible by a whole host of technologies and services, like Happy Returns, like Shopify, like some of the other platforms that are on this series, like Octane and Route, and so on. And so I think, there's a tech stack that we're being able to create now that is giving us this ability.

Phillip: [00:18:02] The modern commerce operating system. It's the operating system of eCommerce.

Brian: [00:18:08] So Zach...

Phillip: [00:18:08] I'm curious. Yes, I was going to redirect to Zach, too.

Brian: [00:18:12] Zach, what's the stack that you've built? And tell us about how these technologies have helped you sort of scale to this experience level that you maybe weren't able to reach before or that your customers now expect that's almost an unreasonable level of expectation that has just happened in the past few years.

Zach: [00:18:35] Yeah. We are using Shopify for our site. So that's a lot of the back end for us. We're using Happy Returns for our reverse logistics. We're using Zendesk for our support. We also use Gorgias for our support in a different capacity. So we have both of those offerings. Yeah, those are the main ones that stick out. We use Narvar as well for customers once they purchase to track their package. Yep, those are the main ones.

Phillip: [00:19:16] Those are all so very vital because they're customer facing. And when you think about our prior series, Brian, the customer experience and being proactive, having the right technology integrations is key. I'm curious, Zach, too, how integrated are those systems into every other piece of the customer experience? Do you have people living in multiple pieces of software that manage the CX part of the business for Public Rec every day?

Zach: [00:19:51] Yeah, yeah. I mean we have a few different people overseeing that and like something that sticks out to me that I just think is interesting in the space is like all of this software has evolved so much over the last three, five years. When you think about some of the earlier direct to consumer brands that started, like a Bonobo's. I don't think a lot of this was available to them. And a lot of this has been borne out of all of these brands starting, which I just think it's super interesting, which is really improved the customer experience for brands to use these softwares. And as we talked about earlier, to try to compete with Amazon's experience.

Brian: [00:20:32] Yeah, that's a really good point. It used to be that you had to own more parts of this process instead of partnering with third parties. And now you're looking at there's a whole menu of options out there to pick from to partner with. In fact, there are very few brands at this point that want to own certain parts of this. Is there anything left in the stack where you feel like it's something that you want to keep close to your vest? Or are you looking to partner for basically the whole experience?

Zach: [00:21:09] I think we're looking to partner for most of it. You know, I think it maybe starts to make more sense when you get to be a little bigger, when you're maybe one hundred million plus and you start to build your site on different backend and different... Yeah. Which at least Public Rec is a little bit away from. But to me I think more of it was we worked with a lot of agencies in the beginning. We had a marketing agency, we had a web agency, and over time we brought a lot of that in-house as the business has grown and we've been able to justify this is now a full time role. So that's hire someone to just do this role that we maybe didn't have all this work for when we just started. So that's more of how I've thought about what do we own as a business versus what do we outsource and the software associated with it?

Phillip: [00:22:05] When we were building eCommerce back in 2007 and 2008, we were literally building eCommerce. Like we built it, we hosted it. We didn't call it direct to consumer back then because we weren't fancy, but it was just eCommerce. And yeah, I mean, if you wanted a support system, there was one out there that was a desktop application for Windows. So we had to build one. And I just think about how much time I had spent in those early years in the career and being an IT professional and not necessarily a retailer. And I think that it just it provides so much bandwidth for you, Zach, and a business like yours to really focus on what your core competency is and that's making meaningful products that people fall in love with and not necessarily being a technologist. Does that resonate with you?

Zach: [00:22:56] Yeah, absolutely. Yeah. I mean, to me, that's the most important part, is making a product that's differentiated and better than what's out there. And hopefully we do the rest of the stuff well and we communicate the message that we've done this and that people get the product and it resonates. But yeah, to me, that is our core competency, trying to make the best product possible.

Brian: [00:25:52] That makes a lot of sense to me as well, and David, I'd love to hear your thoughts on this. This doesn't actually pit us up against Amazon in many ways. This allows us to sort of give customers options they feel comfortable with. Do you feel like, David, do you feel like we're up against the Amazon on this? Talk to me a little bit about sort of the strategy that you think about when you're talking about direct to consumer brands and how they can leverage Amazon or not leverage Amazon and the benefits of kind of driving things through their own channel.

David: [00:26:34] Yeah, I mean, as you guys were talking, I was thinking about my own experience in eCommerce, and I'm going to date myself a bit here, but I worked for eBay kind of 2003 to 2007. And then I ended up moving to LA and working at HauteLook and then I worked at Revolve. And in every one of those instances, we built everything. It was sort of in an era where, you know, not only did you sell stuff, but you actually built your website and you maintained your website and you built a warehouse and you maintained that and compare that to today where Shopify can help on the web side and 3PLs can help with logistics. And companies like Happy Returns can help with returns. I think it's just sort of a fundamentally different era. And I think, to your point, kind of allows you to be focused on what creates that emotional connection with your customer. It's not the speed of fulfillment necessarily. It's what's in the box. To kind of speak to your point, though,  [00:27:38]I do think everyone is competing with Amazon in terms of just the mindshare around what do I expect and what do I expect great eCommerce experience to be? And I think it's sort of an unforgiving atmosphere. And what I mean by that is that, like it or not, we all like getting things quickly, right? We all like friction free returns. We all like the reliability that Amazon has sort of conditioned us to expect when we're buying things online. And so I don't think that a brand like Public Rec is necessarily pitted against Amazon from a product perspective. But I think it's the expectation that people have of shopping online, which is "Why can't everything just be easy the way it is with Amazon? Why can't it all be fast? Why can't it be friction free?" And so from that standpoint, I think we all live in Jeff Bezos' world, unfortunately, fortunately or unfortunately. [00:28:37] And I don't think you can deny that they're the ones that are setting the pace with regard to what we all expect. You know, I mean, it's hard when I think about, like my kids, they don't have patience for things that take a long time to ship anymore. They're kind of like, "Why is it not here already?" as one example, and I think that that's a function of just how much Amazon has become integrated into our day to day lives. They expect everything. They expect to be able to buy everything online. They expect it to show up quickly and now expect it to be easy to return it.

Phillip: [00:29:13] I'm wondering if there is a feedback loop in the way that returns happen back to a brand such as Public Rec, where in another marketplace, because you're not necessarily owning the relationship with the customer, it might be more difficult to feed that sort of information on the return reasons and back to the product innovation side of the business. I'm curious what your experience is, Zach, in sort of the value of customer return and exchange and how it guides your product decisions?

Zach: [00:29:50] Yeah, yeah. It plays a big role, I think, in our product development and improving products. We started partnering with Nordstrom earlier in the year and we've been selling through them. And we don't have much visibility into what their returns look like or how customers are receiving the product. And so really, the only way we know about the performance of our products or what customers think is returns, exchanges, feedback that they leave us, reviews that they leave on the site. And all of that comes from customers purchasing on the website. Even if a customer is purchasing through Nordstrom and whether they like or dislike the product, we don't hear any feedback in terms of any sort of review. I think being able to sell directly to the consumer and get the feedback right away on this fit well. This didn't. This thread came on and then we see maybe this thread came undone in the same place multiple times. Let's talk to the factory about why this is happening. All of that has helped us kind of improve the garments and also informed us on what our customers want to see next. You know, when we hear feedback of "I like this pair of pants, but if this was a jogger..." or feedback like that, it helps inform how we think about building out our product offering. All of it is super helpful to own the relationship with the customer.

Brian: [00:31:19] That's really cool. Yeah, I was just thinking about reviews and the role that they play in this whole process, and that's something that you were seeing, David, as well. It's really interesting to me that there's so many reviews out there that you can go read. And I think this plays into the whole process of improving that experience. But there's so many reviews that are low stars just due to shipping time or your return policies or things that don't have to do with the product. And so I think it's really interesting how a bad experience, a bad purchasing experience, can impact purchasing a view of a company in the future as well. You know, thinking about what you just said, Zach, have you experienced any of that kind of feedback that has driven you to improve the whole buying experience?

Zach: [00:32:15] Yeah, you mean like the return experience or just...?

Brian: [00:32:19] In general, return experience and/or other places?

Zach: [00:32:22] Yeah, absolutely. We get reviews on the experience with Happy Returns constantly about people being satisfied with the experience and really enjoying it and how convenient it was. And so that's been super encouraging as we've partnered with them to hear the feedback from our customers of how they enjoyed the experience. And I think it just frees them up to want to come back to us and to feel good about, "I'll give this product to try. If I don't end up loving it, I know that the returns process is smooth and something I'm comfortable with and enjoy. So I'm more willing to try more products with Public Rec." And I mean, we're looking at that in multiple ways. Shipping transit times, and should we be using a different carrier? And we're constantly kind of trying to see how we can improve the customer experience while also weighing the cost benefit analysis to us in terms of, you know, can we still be profitable in whatever we think is the right move for the business?

Brian: [00:33:21] Yeah, and I was just thinking about how damaging a bad experience can be. And obviously things have gone so well for you guys with Happy Returns and some of the other technologies you picked. But I would imagine that customers are constantly thinking, well, if things go poorly with this experience, I'm just going to go use Amazon. They're running like cost benefit analysis. Maybe not consciously, but subconsciously, like against Amazon all the time. Was it worth it for me to go buy this from Amazon or, I mean, off off Amazon? Or should I have just stuck with using Amazon to do this to make this purchase? I would imagine we're seeing psychological changes right now with consumers, that everything is being weighed against the experience that they have with Amazon purchases, which is why 50 percent of US purchasing online is with Amazon. The experience, once that is out of the way, when they don't have to think about it, to me, that's when things the run the smoothest. Have you seen as you've added technologies and services like Happy Returns, Zach? Have you seen conversion improve? Have you seen bumps in traffic converting from maybe one channel to another?

Zach: [00:34:51] It's a good question. I don't want to speak out of turn. I don't know what our conversion rate looked like pre and post Happy Returns. I will say that we have gotten customer feedback, that people have enjoyed the switch and it's significantly decreased our costs. But I guess I just can't count on what our conversion rate looked like pre and post. I imagine that as customers have been through the experience, they've been more willing to come back and more willing to buy more and try more things. But yeah, I would have to look through the data a bit more.

David: [00:35:31] Yeah. I mean, we've we've tried to look at what impact does returns have on long term lifetime value ultimately is what you would want to see. And what we found is that there's so many factors that go into that equation. You know, it's really hard to tease out the impact of returns and specifically Happy Returns. But what we do know is a couple of things. What we do know is that the pain or the perceived pain of returns has a huge impact on whether someone's willing to shop online in general. We know that the return policy is something that most, if not all, shoppers look at before they check out. So it has a huge impact on conversion rate. And to a point that one of you made earlier, it has a huge impact on customer retention. And I'm talking to brands, I often talk about sort of the cost of getting it right and the cost of getting it wrong. And there's a lot of data that supports this. But, you know, if you get it wrong, meaning if a customer buys something from you and then has a bad experience returning, they're really unlikely to come back and shop again. And I can speak to my own experience here. There have been times where I bought something and then I go to return it. And I didn't realize that it was going to be a pain in the butt or there was a fee that I didn't expect or my gosh, I send it in. And then I had to call multiple times to get my refund. Those tend to be retention killers. People won't come back and shop with you again. And in an environment where customer acquisition cost is rising and it's so expensive to get someone's attention, let alone get them to buy from you, it's really hard to have your return process be the thing which ends the relationship. The flip side of that kind of getting it right part, I'm glad to hear Zach and his customers have had a great experience with us. [00:37:36] We think that's kind of the magic moment, which is if you can take my disappointment as a shopper, something didn't work and now I have to return it, and you can turn it into a delightful experience, well, gosh, I'm so much more likely to shop with you in the future because I know that, hey, if it doesn't work out, it's not going to suck. And let's be honest, returning via the mail just sucks, right? [00:38:03] I mean, no one wants to deal with printing labels and no one wants to deal with boxes and no one wants to deal with the hassle and the weight of checking your credit card statement to make sure the refund came. It's really that becomes an opportunity to create loyalty with shoppers where they're more likely to say, hey, you know, this thing didn't work out. I think customers are willing to give eCommerce merchants the benefit of the doubt, which is like, hey, you know, I wasn't able to try it on or wasn't able to, or maybe I bought multiple sizes and I'm returning the ones that didn't work. So there's a fair amount of I think understanding that returns are part of shopping online. Where I think there's no tolerance is if this is a bad return experience, I'm not going to shop with you again. If it's a good experience, I'm more likely to shop with you because I know it's not going to be terrible if it doesn't work out. And I think it's if there's one kind of counterintuitive challenge that we've had in building our business, it's this idea that making returns easy is good in the long run. Because I've had plenty of conversations with merchants that are like, wait a minute, why would I want to make returns easy? You know, isn't that can increase my return rate? Isn't that going to be more costly for me? And the answer is no, it's not. What it's going to do is it's going to improve the retention of these customers because nobody makes the decision, am I going to return this because of how easy it is? People make a decision, am I going to return it based on their love for the product. Or the fit of the product or, you know, sort of like two separate decisions. One is, do I want to keep it or not? And then the other is, how mad am I going to get if this process is tough? And how much of that am I going to project on to the brand that I bought from? So I think it has a huge impact upstream, and I think it has a massive impact on retention. And I think it's important. And then unfortunately, returns is one of those things that's easy to think about, oh, this happens after the purchase and this happens downstream. And so I only need to think about the people who the purchase didn't work out for. The reality is it has a massive impact upstream in terms of who shops your site, in terms of whether they check out. And so I think it has to be given its due and the customer journey, which is this is as important as, you know, your return policy and the expectations that people have when they read it are just as important as speed of delivery and quality of the product and how you merchandise it. And, you know, it's just part and parcel of the customer experience.

Phillip: [00:40:43] That's such an interesting point, because I think to myself, an adage from being back on the brand side so many years ago was [00:40:53] the most expensive mistake that we make, is the one that prevents a customer from coming back to us. [00:40:59] And when you think about it in terms of engendering trust and creating a, dare I say, lifelong relationship with the customer... CLTV is my favorite metric, by the way, because most people track lifetime value on a three month horizon and not over the lifetime of anything. But I digress on that. But the interesting impacts of these multiply by zero effects, like you could do everything right, but if you do returns wrong, it nullifies all the other work that you've done. You can have a stellar product. If someone is stuck with it, then the likelihood of them returning is much lower. And this is where I cough and go {cough} Lululemon. And that's all. I'll just leave it at that.

David: [00:41:53] Yeah, I've got some stuff in my closet that, you know, I didn't return it because it was a pain in the butt to do it. Or there was one in particular I'm thinking of where I didn't realize there was a charge. And so I was like, well, I'll just keep it right rather than paying you for the rights and look at it. I look at it every day. It's like every day I'm reminded that I'm not shopping at that merchant.

Phillip: [00:42:16] It's like a totem of a mistake that they made. I'd love to get some sort of as we are closing up on our time. I'd love to get some sage advice from two brilliant operators. We rarely get to sit with folks like yourself. Zach, I'm curious, if you were building the business today instead of five years ago, what are some things that you think were multipliers that would help you to achieve success faster or scale faster or avoid some pitfalls along the way that you could give to those that are listening now?

Zach: [00:42:54] Good question, at least for me, in my experience, I kind of wish I had hired a bit sooner and I think we would have moved a bit faster. The one other thing I'd say is just starting a company and my expectations coming into it and having a background in finance, I kind of always felt like I'd be pretty good at understanding the cost and how long things would take. And so I'd constantly hear "Things are going to cost more. They're going to take longer than you expect." I'd be like, "OK, I'll put in a budget for however long I think it's going to take or cost and add something to that just to protect my downside." And things always ended up costing more and taking longer than whatever I could predict. So I guess that's just, you know, I don't know how you manage against that other than to be OK with that expectation and maybe have the resources to afford yourself to have some room there when things end up taking longer or costing more.

Phillip: [00:43:52] Well, thanks for that. How about you, David? I'm curious, what's some sage advice that you can give a business operator that might be looking to make their business scale and maybe how returns plays into that?

David: [00:44:07] Well, I was thinking about Zach's comment about kind of hiring. And, man, I think especially in a startup, there's so much emphasis placed on speed and trying to do things quickly. And the one area where I don't think that applies at all is really in hiring. And I would say, I mean, and this sounds like just I feel like plenty of other people have made this point, but it's really true. It's the sort of like hire slow, fire fast kind of thing, like take your time. The challenge with the startup is that by the time you get around to writing the job rec and posting the job red... Like you never hire an advance in a startup. You're always hiring, like when something's broken. It's like we did this and we tried to do this ourselves for such a long time, and now it has just gotten to the point where it is totally broken and we're willing to spend the money to hire someone to do this full time. So at that point, you're really impatient to fill the role. We've had times where I'm like, and I think I may have even said this in hiring discussions, it's like, does the person have a pulse? Do they want to join? OK, great. We just need this. We need someone to solve this problem. Obviously, the challenge with that is that if you hire the wrong people, it's not just can they do the job? It's sort of like the the impact on the organization of hiring the wrong person and the pain of letting folks go and the pain of something didn't work. It's just not worth it. You're better off to take your time and to find the right people and find people that are not just right for sort of the moment, but people that can grow with you. And that's a harder thing to tease out in interviews. You know, we found employing exercises, for example, along the way is really helpful, especially things like marketing or or even engineering, things like a coding test or a marketing exercise to really get a sense of the person's skills. And it's in everyone's interest for you to go slow and to make the most informed decision you possibly can, because even when you do that, sometimes you get it wrong. But I just say despite the kind of preconditioning that you have to move fast and the expectations of your investors to move fast and just sort of like startup culture of let's move quickly and break things, you definitely don't want to take that approach to hiring. You want to move slowly and deliberately and thoughtfully because those decisions last and they shape the culture.

Brian: [00:46:54] I just think about the topic of this miniseries and how to compete with Amazon and think about how Amazon hired and the process they go through to to bring people on. It's quite thorough. And it's a long process. And [00:47:15] I think, if we consider people one of our most important differentiators as businesses, I think that both of you have said something incredibly important, which is don't be afraid to hire people and make sure you hire the right ones. [00:47:31] And I think that's a great way to to wrap up a show about how to compete with Amazon in 2021. Thank you both so much for joining us.

David: [00:47:41] Thanks for having me.

Zach: [00:47:43] Thank you.

Phillip: [00:47:46] Hey, thank you so much for listening to this episode of Season 5 of Step by Step, and it was brought to you by the fine folks at Route and all of their partners who actually made this possible. And just remember, Route is the premiere post purchase experience platform. And that means that anything that you need from the click of the checkout button all the way to the package arriving safely inside the home, Route can have you covered. That's live package tracking updates. That's order protection that covers things from missing packages and broken items and poor carrier communication and customer service automation. All of those things save you time and money, but it puts money back into your pockets because customers are going to come back and purchase again. You should check out Route. I'm a big fan and 8,000 other retailers all over the world are too. It's completely free for you. And even better, it could put money in your pocket today if you take a hundred dollar gift card when you sit down and take a demo and that's all you got to do. You can go get that demo, go get it right now, at Go.Route.com/FutureCommerce. Go get the demo today at Go.Route.com/FutureCommerce. Other episodes can be found at FutureCommerce.fm. Drop us a line and email us. Tell us what you think at hello@FutureCommerce.fm, and subscribe to our Insiders and The Senses newsletter that come out every Tuesday and every Friday. You can get that at FutureCommerce.fm/Subscribe. Thank you so much for listening to Step by Step.

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