The CEO of Happy Returns explains ‘the bright side of return fees’

It wasn’t so long ago that a printer in the home didn’t seem as anachronistic as a butter churner, and what consumers often were hitting Command P for was to print labels for returning online purchases in their original boxes.

But then Happy Returns came along in 2016 and has pioneered box-free and label-free returns, enabling consumers to simply bring the item to one of its retail partners, have a QR code scanned, and instantly receive their refund. A similar process was adopted by Amazon a year later, in 2017, when it started accepting returns at Kohl’s locations.

UPS recently purchased Happy Returns for $465 million from PayPal, a 75% increase on the $265 million it paid for it in 2021. Like you, friends, nothing gets our blood pumping like hearing about the finer points of return logistics, so we spoke recently with Happy Returns co-founder David Sobie. We asked about the impact of the UPS acquisition, whether the Happy Returns brand identity will remain intact, and what the company calls “the bright side of return fees.”

This interview has been lightly edited for length and clarity.

What’s the biggest immediate impact of being purchased by UPS?

UPS stores, of which there are 5,200, are now kind of the anchor tenants in our return bar network. So 5,200 locations in great places around the country: very convenient, where shoppers can bring items in without a box, without a label, just a QR code to drop their items off and have their refund or exchange initiated on the spot. UPS now makes up a little more than half our network of drop-off points.

Will you keep on being called Happy Returns, or will UPS rebrand it as something like UPS Reverse Logistics Solutions?

I spent all day yesterday down in San Diego with UPS Stores. That business unit used to be Mail Boxes Etc., right? It was Mail Boxes Etc. for several years before it became rebranded as The UPS Store…

So, for now, we’re “Happy Returns, a UPS company.” Who knows going forward in the future, but I can think of worse brands to be associated with.

A recent Happy Returns report used the expression “the bright side of return fees,” a phrase that may strike many consumers as counterintuitive.

I think the bright side of return fees is that software like ours allows merchants the chance to use fees as sort of like carrots and sticks to create the right incentives for their shoppers. For example, it used to be I had one kind of return policy, and it was either free or fees for everything. Now, you can do things like, “Hey, I’m gonna charge a fee if you return by mail, but it might be free if you return to my store or free to return to Happy Returns.”

Why did they do that? Well, they’re subsidizing the free return. And so what are they gonna do? They’re gonna subsidize the cheapest method.

Or the bright side could be maybe I don’t charge you the return fee if you’re willing to do an exchange, but if you want your money back, then there’s a return fee for you…And so it’s really about carrots and sticks, you know, and trying to use return fees as a way to mobilize the right behavior or the desired behavior out of shoppers.