UPS invests in reverse logistics startup Optoro as returns volume rises

The wrapping paper has been cleared away, Uncle Steve is on his seventh whisky and you are ensconced on the couch, half-buried under a pile of gifts that you’ll never use or wear. But your holiday work is still not done – it’s time for unwanted gift returns season.

On Jan. 5, millions of consumers worldwide are about to participate in what UPS has dubbed “National Returns Day,” the integrator’s busiest day of the year, when holiday shoppers use UPS to return more than 1.3 million packages to retailers and manufacturers.

To meet growing return volumes, UPS has joined as a backer in reverse logistics provider Optoro, Inc.’s latest US$30 million round of funding. UPS invested in Optoro through its UPS Strategic Enterprise Fund.

Optoro provides a “one-stop-shop solution for retailers and manufacturers to optimize the transportation and disposition of returns and excess inventory.” The company offers reverse logistics software, direct-to-consumer marketing (reselling returns) and business-to-business marketing.

Annual returns add up to an estimated $260 billion in value in the United States alone, meaning that, “retailers are facing a growing number of challenges, with the rise of customer returns being one of the most prominent,” said Tobin Moore, co-founder and CEO of Optoro.

In addition to having a stake in the tech startup, UPS plans to use the alliance to offer a joint platform to help retailers reduce reverse logistics costs. The offering will include guidance on how to resell items once they are shipped back.

Business Insider reported that reverse logistics costs cut into retailers’ profits by as much as 10 to 20 percent. Returns by U.S. consumers represented 8 percent of total retail sales in 2015. As online shopping increases, so will returns, and UPS hopes that Optoro’s contributions will “optimize the flow of goods, information and funds.”

UPS is not alone in tackling this sector or retail business. In early 2015, FedEx bought third-party logistics provider GENCO Distribution System for $1.4 billion. The GENCO buyout represented a much larger figure, and physical investment in the product returns business, at more than 600 million items annually. The company also offers conventional supply-chain services.