The 5-Point EBITDA Opportunity in Reverse Logistics

What if returns are hiding 4–5 points of EBITDA in plain sight?

In this episode of the Resilient Supply Chain Podcast, I’m joined by Terry Boyle, CEO of Trove, to explore one of retail and logistics’ most neglected pressure points: reverse logistics. Terry’s argument is blunt and useful: if brands care about supply chain resilience, sustainability, risk, data, and visibility, they can’t keep treating returns as the untidy corner nobody wants to inspect.

You’ll hear how online returns are reshaping inventory economics, why imperfect product too often gets parked on pallets until value evaporates, and how better returns processing can unlock labour savings, faster return-to-stock, stronger resale pricing, and fraud reduction. Not glamorous. Very profitable.

We also break down why customer-reported returns data is often unreliable, how item-level visibility can feed back into design, sizing, packaging, supplier decisions, and quality control, and why sustainability may scale faster when it is sold as better inventory economics rather than moral virtue alone.

Interestingly Terry also shares the very real problem of “boxes of rocks” showing up in returns, because apparently even fraud has a logistics department now.

🎙️ Listen now to hear how Terry Boyle and Trove are rethinking returns, resale, and the hidden economics of resilient, sustainable supply chains.

 If disruption hit tomorrow, would you know where your supply chain was most exposed? In 15 minutes my free scorecard helps you assess 27 resilience statements, calculate your score, and turn the result into three priorities and a 30 day action plan. You can download the scorecard free at tomraftery.com/scorecard.

Transcript

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Terry Boyle: 0:00

Almost nobody focuses on the reverse logistics. When you look at the P&L there's somewhere between four and five percentage points of EBITDA improvement that's just lurking in your reverse logistics. The intelligence that happens at the point of returns processing enables things like selling imperfect product, or routing things to off-price better, or fighting fraud, that all adds up to a pretty massive P&L benefit.

Tom Raftery: 0:34

Returns are treated as the messy bit at the back of retail, but what if that mess is hiding margin, resilience, fraud risk, and circularity all at once. Good morning, good afternoon, or good evening, wherever you are in the world. Welcome to episode 126 of Resilient Supply Chain Stories and strategies that Keep business moving. I'm your host, Tom Raftery. Today I'm joined by Terry Boyle, CEO of Trove, a company helping brands manage returns and resale more intelligently. Terry argues that reverse logistics has been badly underserved even while forward logistics has been optimised down to basis points. In this episode, we look at how returns can shift from cost centre to strategic lever recovering margin, improving inventory flow, and giving brands better data on what is actually happening after the sale. And yes, we even get into return fraud, including the wonderfully bleak reality that sometimes the thing arriving back at the fulfilment centre is quite literally a box of rocks. Let's get into it. Terry. Welcome to the podcast. Would you like to introduce yourself?

Terry Boyle: 1:55

Absolutely. Thanks for having me Tom. My name is Terry Boyle I'm the CEO of Trove. And Trove provides software for companies to manage returns and do resale

Tom Raftery: 2:04

Okay. Let's dig into that a little Terry, what is Trove specifically and why does it exist?

Terry Boyle: 2:14

So Trove actually started as a branded resale company and it was very focused on doing good for the environment. So the idea was to have brands like Patagonia and Arc TerraX run these trade-in programmes for those brands to condition grade the trade-ins and resell them on their own site. And that's what we call branded resale. And by doing this they take over the secondary market and make sure that the items that they've already produced in the world are reused at the highest value. But what we've seen over time is that most of the resale programmes that we do have a backbone of returns. And we had already built all the competencies to do returns. And for a lot of companies it's hard to go from zero to a trade-in programme And so what we like to do is start with returns processing. So we have the next generation of returns processing software. It's all touchscreen visually based and it really allows the operator to efficiently process returns. And we do all types of returns. We do wholesale, retail, and direct to consumer. And normally there's a labour savings. So we normally see somewhere between 25 and 40%% labour reduction, which more than pays for the software. But then you get all these other benefits. For a product that can't be resold as new which is usually somewhere between eight to 12% of the return stream, we now allow you to immediately condition grade that and put it back on sale. So historically what happens with that product is it's put on pallets because they don't know what to do with it. And it sits around and then maybe once or twice a year if someone does a sweep asks what that is and they liquidate it. And they get 5 cents on the dollar. Our programmes let them get 65% cents on the dollar. And so you know what I've become a big fan of is looking at reverse logistics I have a mixed background I was a COO CFO at the start of my career and I've been a president CEO kind of in the last 15 years. And I always look at everything down through a P&L lens. and what I would say is you know everybody's optimised forward logistics to the nth degree and everybody's super focused on it. They source their materials carefully, they pick their factories carefully. They decide whether it's coming boat or air, master carton size box size everything. Everything is down to like basis points there. Almost nobody focuses on the reverse logistics. When you look at the P&L I think there's somewhere between four and five percentage points of EBITDA improvement that's just lurking in your reverse logistics. It's not all returns processing but the intelligence that happens at the point of returns processing that enables things like selling imperfect product, or routing things to off-price better, or fighting fraud that all adds up to a pretty massive P&L benefit. And so our software powers all of that.

Tom Raftery: 4:57

Okay. Interesting. And, your own background spans retail, e-commerce, and AI. What did that teach you about where value leaks out of modern retail?

Terry Boyle: 5:09

There is a lot of leakage in reverse logistics I was lucky enough to you know start nordstrom rack.com and work inside of a large pumping company at the time which was Nordstrom. And what I would notice is that well one we were an off price business so we were also getting a lot of this sort of orphaned inventory that brands had. But a lot of times people have these large accounts these write down accounts for when inventory gets end of life and they'll just use that to move the inventory out. Those are usually pretty significant numbers and what happens a lot of times is it's not tracked at the style or SKU level so it's just kind of like hey we've got a bunch of stuff we're putting it against that account and we're moving on. And I kind of always wanted to know more. I was like Hey what styles were hit? What did that actually do to the overall margin of that style? I want the lifetime margin of that style because a lot of times we all know which styles didn't do great and which didn't sell well but tracking all of that margin for the lifetime will hammer it home to the product designers, the buyers and all that. And so I started to realise as managing the P&L that we would get to the end and we'd do all these write downs against these accounts. And I would watch my EBITDA just drop like a rock. And as we started to get into this I was excited that this will give brands and retailers more control over the chaos that is reverse logistics so that maybe they'll have fewer surprises and more levers to manage those P&L hits

Tom Raftery: 6:40

All right. And what has changed in retail that made returns and resale impossible to treat as side processes?

Terry Boyle: 6:50

Yeah I mean I think it's well documented that return rate is you know continuing to go up. I think the more that you sell online with a higher return rate, usually online return rate is at least 20%%. And in the case of apparel and footwear sometimes 40% or 50% when it's sold online. When it was sold in the store it was usually like 8 to 10%. So you know as the economy shifts to more online sales your return rate's just gonna go up. And consumers continue to participate in behaviours that aren't awesome like showrooming and figuring out how to use the very generous return policies that folks are competing on to kind of build a way to have higher returns.

Tom Raftery: 7:31

What's showrooming?

Terry Boyle: 7:33

Showrooming is when you decide that hey you've got a party coming up or you've got something coming up and instead of buying one pair of jeans in your like one size you buy three pairs of jeans. They're the same pair of jeans in three different sizes cause you wanna see how they look. Or you buy five different dresses when you know you only need one and you're gonna see how they look on you

Tom Raftery: 7:55

Okay. I I heard that called bracketing before. so showrooming is a new, a new, phrase for me.

Terry Boyle: 8:02

Bracketing doesn't feel like what a consumer would call it but show but but it but it's probably true But I think showrooming is like they wanna recreate the experience they have in the store where they bring everything to the changing room and decide what looks best But they can't cause they don't physically have the product so they bring it into their house

Tom Raftery: 8:18

And why does this increase in returns matter now for supply chain leaders, not just retailer sustainability teams?

Terry Boyle: 8:27

It costs a tonne of money. If you think about a company that if the average return rate is 20% and if you're in apparel or other categories and you might have a 40% return rate that means that everything you're doing in logistics to pick a pack and ship it to the customer somewhere between 20 and 40% of the time that's a write off that you're gonna have to spread out across everything you do. Then you've gotta sort of pay to get it back in your facility. You gotta pay to process it. You gotta pay to put it back in place. And by the way time has elapsed, so a lot of this product now is no longer what you're focused on. So this is where off price begins in this kind of cycle. And then you have some of this imperfect inventory that you don't know what to do. And it just all really adds up. The other thing I would say is and I've done this like I've built a million square foot facility and I love to give tours of it and I had conveyors, and shipping orders, and put to light walls but I would run people past the returns area cause returns there's nothing pretty about returns right. Like the boxes don't come in and look nice on your dock. Like they're whatever the consumer could find. They come in If you're not using a consolidator direct from the carrier. It's chaotic. And then what do you have? You have people opening boxes looking down at machines looking at like these objects. Nothing about it has really been optimised. And so people just don't like to spend time there. And to be honest I don't think most people understand the level of leakage that's happening there because it really as as your return rate is hitting 20, 40% there is massive leakage happening there.

Tom Raftery: 9:58

Of course. Of course. And how do you turn that from a cost centre into a profit centre?

Terry Boyle: 10:04

Yeah we wanna make the the fulfilment team heroes right? Like everyone always jokes that they're the L in P&L particularly if you're in like a brand or a retailer. And there is some of that. So look the core of it is a value proposition that everybody can get behind which is essentially Hey for X dollars you can reduce your labour by 30 to 40%. You're already getting like a very nice return on your investment. So if that's all you did which is basically just like a fulfilment centre efficiency project you're already fine. But there's a lot more that you get from it right .So again if eight to 12% of your return flow comes back it's not perfect. Instead of throwing it on pallets and getting 5 cents in the dollar a year from now you can move that. And it doesn't have to be through branded resale. We can move it through marketplaces or other means but get the cash faster and get more right? The the sooner you move on that product the higher the value in the market's gonna be. You're not talking about a little movement. The ability to get 65% of retail through a branded resale programme versus 5 cents of retail through clearance, that's massive. The other thing that happens there is we start to actually generate a lot of amazing data because of our background at really looking at product flaws and cataloguing them. We really end up with a unique data set that you can feed back into your company to say Hey we've noticed that this particular pair of pants had like a two x over baseline return rate or this particular handbag had a real problem with a handle. And so that information really almost doesn't exist now. And like the product development people will be able to see pictures can potentially see videos if they want to and they'll see very specific detail in the reporting. So that's like another level that isn't really accessible now. We also allow people to run their returns area as efficiently as forward. So we have agent processing productivity. We understand the difference between how long it should take to process item X and process item Y So we can control for that in our productivity measure. That's something you're not seeing a lot in the returns area. Our flow tends to be very visual and touchscreen so it's easier to get an agent trained up. And one of the things that makes our product unique is we've created what we call workflows. So a company can decide to use em or not but if they use them they can create a unique returns flow for any product they want. So imagine if you introduced a new product into the marketplace and you wanted to be super sensitive to how it was performing. You'd essentially create a special workflow to maybe check a couple of things that you were worried about and you put an alarm on it that says Hey if returns get above this baseline send an email to X so that they can look into it. We allow that type of stuff. Also fraud's become a big issue right. So everybody move the return policy to Hey we'll pay you as soon as it's scanned in the system. And then it gets to the fulfilment centre and you got a box of rocks and I'm I've seen it like there's literally boxes of rocks. So we allow companies to take photos of that and move it in an integrated way into their customer service system and basically withhold the refund if they want or try and claw it back. And so that's real money too. And then, there's another like early component here which is again as I mentioned before a lot of the returns flow is really already aged inventory depending on the return policy when they bought in season, that's gonna come back in and you may not be selling it directly on your main site or in your stores anymore. Understanding that very quickly and moving it to the appropriate channel as fast as you can which you can do with our system at the point of return, that can get you 20 points of margin right there.

Tom Raftery: 13:44

Okay. And let's talk a little bit about margin recovery, inventory flow and resilience. Where does the financial impact usually come from first? Is it labour savings? Faster, return to stock? Better resale pricing? Fraud reduction? Something else entirely?

Terry Boyle: 14:01

No no I think you've nailed the big one. So I I kind of look at it as a stair step. So the first impact you're gonna see in the one that everybody is gonna be willing to underwrite is the labour savings. So you're gonna get probably a 25 to 40% savings in labour. That's gonna more than pay for the software. You're gonna get like a very aggressive return on that investment. Which by the way isn't necessarily even an upfront investment. But regardless you're gonna get a very aggressive return. Then you hit on something which is back to stock. It may seem counterintuitive because we're looking for flaws, but because we kind of standardise and allow the operators to almost go and follow the system instead of exercise their own judgement, we do see an increase in return to stock. Usually if your return to stock's 90% we'll see it jump to 92, 93%. That is an enormous savings right there. So that is essentially the difference between getting full margin of like 80 points and potentially getting liquidation margin of five. So like there's nothing bigger than that return to stock and almost everybody can bank on that. So that's massive. Again your ability to get more margin out of your imperfect product, that's enormous. But look a lot of companies, they may not pursue that right away. They may decide like actually we don't wanna do branded resale. We wanna move that through a marketplace. So maybe they're not getting you know 65% of retail maybe they're getting more like 50 but they're still getting a lot more than clearance So that's another level. Fraud is another level as well. So I mean it does depend on how the company decides to pursue it. If they literally turn off the refund on scan and use us to trigger the refund, the savings are significant. I would say it's a couple points of EBITDA but if they kind of use us to almost claw back or like blacklist the customer in the future the savings are a little bit less, but you are kind of building like a resiliency in your company to say okay this isn't gonna keep happening. We have a record now that this particular customer, or this particular address did this, and we're not gonna allow it again. And then the last value prop and again not a lot of people are here yet but I think this is where it will go, is really having like early indicators that this shouldn't be put back in stock. That this should be moved somewhere else and moved to another channel that's like less than full price. But rather than doing that six months from now you're doing it in real time.

Tom Raftery: 16:50

All right. And does better returns data, feed back into design, sizing, packaging, supplier decisions, QC, that kind of thing?

Terry Boyle: 17:02

It could, and it should. I think that we give people really data for the first time. So if you think about it returns data for the rest of the company is terrible. So most returns data is based on customer reported reason. And customers are really scared of one thing, that you're not gonna allow them to return it. So they often are are incented to pick an option that like they know you have to take. So that data can't be taken at face value. So, look our our software can't solve everything. So what we can solve is if products come in with similar issues consistently, we can measure the rate, we can measure where the defects are, the severity of the defect, and the nature of the defect. And so that does for products that have had issues really give the enterprise a data set that they have not historically had. The other thing we do which I think is cool is a lot of people don't really have visibility to returns at an item level. They're looking at a category, or subcategory level. We'll alarm every style, and create a baseline. So if you have 20 styles of pants and your average return rate on pants is 17% we can alarm a style and say Hey if it goes over 17% or if it goes like 10% over 17% send an email to this list and have people look at it. That's powerful. And obviously with AI you're able to access our data in unique ways and you'll be able to get that data yourself. But there is something about having an email show up that says Hey this particular pant now is showing high return characteristics. You may wanna look into it or understand it. It might not be surprising to you but it probably will be.

Tom Raftery: 18:41

And if we look into what didn't work or what was harder than expected, what did, Trove assume early on that turned out to be wrong?

Terry Boyle: 18:51

The economics behind branded resale programmes are compelling. So this idea that you're gonna own your own secondary market, it is compelling. You can make money there it's compelling. A lot of those programmes essentially give a gift card for the trade-in. So they're also having a built in re-engagement into the full line business. So all those fundamentals are good and they all make sense and it's great for the environment. And so it seems like a no-brainer but organisations are not organised around the concept of having a resale programme. So, when you try and sell into an organisation there's no clear owner. And in fact what tends to happen is people are intrigued but then you pay this huge education sales tax where you're you know you start with sustainability, they're excited but they're not necessarily always the decision maker. So then they take you to marketing. And marketing has some concerns about cannibalisation and how this is gonna look next to full price. And then the CFO wants to understand. And so you end up doing these like large group projects where there's a lot of education going on and there is no actual need to make a decision. Like no one has to launch a resale programme by October right?

Tom Raftery: 20:04

No burning platform.

Terry Boyle: 20:05

There's no burning platform. And so I think for us when we took a step back we were saying Hey there is a burning platform around returns, and returns gets you to resale because a lot of these programmes are putting this return merchandise into their resale programmes anyway. And so we think it's gonna be actually easier to accomplish the mission and and do resale for some set of our customers by going in through returns.

Tom Raftery: 20:34

And what's still surprisingly manual in returns and resale operations?

Terry Boyle: 20:40

Well if you go into the average operation today almost everything is manual. So like I think people on the forward side things come in and master cartons in carton sizes that they define. People are using ARDSs so like it's put away by essentially robots. It's picked by robots. They get sent to the sort of packing station. And that's like the only place sometimes you you will see a human. And that's amazing. It is the opposite in returns. It is all people, and boxes, and people opening boxes and taking stuff out and checking against the system for what was supposed to be in there. And working exceptions when people send returns back but didn't tell you they were going to, or people send something back but it isn't yours, or it wasn't what they said they were gonna return. And so it's just like it's the land of workarounds and exceptions. You see a lot of people working on spreadsheets. I've gone into fulfilment centres where they're like putting stickers and paper and boxes and moving them around to like oh if it's got a sticker and paper that means this. So we wanna get rid of all that and automate everything that we can. That doesn't mean everything will be automated today but like, we definitely get rid of the spreadsheets. We definitely get rid of the stickers and the paper and the little marks. And we measure everything. That's the other thing. So if you actually have to do a value added process so one of the things we enable through our workflows is if something comes back and it's not in perfect condition but you could get it there through some rework and you have an internal shop or you even you have an external provider then we can actually use the workflows to put it through there. And so some of our customers are incredibly successful at getting these imperfect things back to actually new grade stock. Which has a massive return for the enterprise. And yeah look I think we just bring the level of discipline that fulfilment professionals expect from everywhere else in the fulfilment centre. They measure everything but when it gets to this it's it's sort of a blind spot.

Tom Raftery: 22:32

Interesting. Okay. And, what do most leaders get wrong when they try and clean up reverse logistics? Are they underestimating data quality? Workflow design? Incentives? Change management? Something else entirely?

Terry Boyle: 22:46

Well I think I would argue that it's just never been prioritised in most places. And so I they may make some little improvement steps but they never go back and completely re-engineer it. And I think we give people that opportunity and being aware that that opportunity exists is probably the biggest step is Hey like you don't have to live with this manual suboptimal paper-based exceptions spreadsheet sharing with customer care like returns world. You can automate everything. You can measure everything. You can start to get reports on it. You can attack it like you do everything else in your business. You can use that engineering mindset again in this particular area where you just haven't been able to.

Tom Raftery: 23:30

Alright. And let's talk a little bit about technology, 'cause everyone's talking about AI. So where can, or can AI genuinely improve returns processing and where is hype ahead of reality?

Terry Boyle: 23:45

Yeah I mean I'm I'm very excited about what AI can do. It's fundamentally changed how we operate as a company. And it is in our product in a lot of places. What I would say is that we are doing a number of what I would call early pilots on using AI and computer vision to actually condition grade returns. But it's a high bar right? So if you think about the average human they're probably getting it right at least 90 to 95% of the time when they're condition grading something. So that means the AI has to do that or better. And so we we do think like the way this is gonna start is that it's actually gonna be used for QA. The way we're thinking about it is we're gonna set it up and we have it set up to sort of like take the photos, analyse the photos, and then score it, and then compare it against how the human scored it, and build this really cool data set. And that's gonna be essentially how we're gonna train the model. And then we're gonna see over time like Hey how's it doing? If it was just alone, how often is it Is it 70% of the time Is it 80% of the time Is it 90% of the time? What changes have to happen? What additional data? What additional picture quality? Whatever it is what additional angle does it need to achieve 95 97% So I don't think it's the kind of thing where you're just gonna go flip the switch. The other thing is you're hearing a lot about robots and I'm super intrigued by robots because I think anybody who's been around a fulfilment centre loves to automate stuff. But the way I look at what we're doing is robots may or may not ever come to the returns area. I can't say for certain. I don't think anybody can. I think there'll be interest but they may or may not come. Even if they do come you're going to need the data set to train them and you're going to need the rubric in which they work. And so you're not gonna be able to do that in today's manual systems and spreadsheet based systems but we essentially create the layer where if that ever happens, we're essentially the software layer the robots would be working in. They would be the hardware, we would be the software. And so I do think that AI has the opportunity to lower costs here, but it's not a light switch. I think you're gonna really have to work at it. And I would say in general like with AI right now like almost no one gives it write access to their databases right. Like it's an incredible productivity tool It it can start giving you the initial code. Then you're gonna check it. Then someone's gonna push it into production. And so that's incredibly exciting and there's incredible efficiencies there. But you can't just turn it on. There's still some controls have to be in place I don't think auditors would be super psyched to have AI writing directly on the general ledger, right? So there's still we're a couple steps away from that So really what we're looking at is how can this help us improve productivity? If our core product saves you 25 to 40% on labour can we get you to 50? Can we get you to 55? Or can we have this kind of module that makes sure that like you're scoring things 99% correct instead of 90 right?

Tom Raftery: 26:48

And how should brands balance speed with accuracy when deciding whether an item goes to stock or resale, or repair or recycling?

Terry Boyle: 26:57

Yeah! Well what our software does is we sit down with a client at the beginning and we articulate with them what their condition grades are and what the routing is. And those condition grades are what I would consider deterministic. So we don't ask the operator to decide what grade something goes in. We just ask the operator to tell us what they're seeing. If they are seeing a sneaker with above average wear on the soles but otherwise good, that might be an A with an additional value added service to address some of the scuffing on the soles, right? But if they get back a handbag and there's like a water stain right at the top by the handle that's pretty significant in size, well that's probably never getting back in the system right? So essentially by defining your condition grades and the routing at the beginning and then checking in to make sure it's working the way you want, that's how you're gonna decide how all this is routed. And that's actually the benefit is you're never asking the person to be like okay in your judgement is this an A no just tell us what do you see? That'll determine based on the rule set what condition grade something is what it gets priced at, where it gets routed to. And that's actually a big advantage to just having that all automated

Tom Raftery: 28:10

And then how, for example, do you keep sustainability as like a credible conversation if the boardroom conversation has shifted towards margin recovery?

Terry Boyle: 28:21

Yeah I will say that was one of my biggest surprises when I got here cause I've obviously you know done some pretty big e-commerce and retail stuff. And I was excited about doing well by doing good. And as reality happened and I got into a lot of pitches, it just isn't the thing in most cases that moves the project through the pipeline to success. It's not never there are brands that are very committed to it. It's part of their ethos. But for the average brand, it's nice, but not sufficient. And so we really focus on the economics, and we really focus on all the things this will do for your P&L, and all the things it'll do for your team, and and the insights you'll get. But there are realities that it is still very much helping the environment. And so having items sell at a higher price I think in general has the benefit of kind of making people value what they're buying. If you pay more you're way more likely to use it. So that's one thing. But like we have a client now that is gonna use us to do return processing and currently they have everybody they call it destroy in field. So that's inventory that basically when the customer calls and maybe they bought through Amazon or maybe they bought through Walmart they're saying Hey we don't have what it takes to make enough money for that return to make sense. So like just make it go away. And now they're like actually, if we get it back and you can condition grade it and we can sell it either on our site or through a marketplace like an eBay or a Depop or one of those then like we can actually make money. And so we're not gonna destroy in field. And so that actually is an economic decision that has a very nice environmental benefit. And generally speaking when you're in this world if you can keep stuff, if you can put more stuff back into stock, if you can get more money for the stuff that's imperfect if you can put less stuff into the bin to throw it away and then if you can get people to say actually taking returns now is worth it. You are having a pretty big impact

Tom Raftery: 30:24

Would you say circularity is more likely to scale when it's sold as climate action, or when it's sold as better inventory economics?

Terry Boyle: 30:31

Better inventory economics for sure I think that I just think and particularly in the current environment, it's not as high in the decision set as it was even three years ago

Tom Raftery: 30:46

And

Terry Boyle: 30:47

I wish it wasn't the case but but but that seems to be where where the market's at

Tom Raftery: 30:52

Sure. Yeah. Yeah, yeah. Trump's war on ESG hasn't helped matters.

Terry Boyle: 30:56

No and in fact I was just at a a pretty cool conference and you're definitely seeing that the climatetech folks are starting to take the gloves off and they're really not necessarily gonna be tied to ESG anymore, 'cause like I think all these issues are gonna be a little bit separate and they're kind of willing to fight a little differently and not just out of altruism but now fight like everybody else did. Fight like crypto did. And I think that's smart and I think like every issue's gotta win on its own. And I think like the reality is that climate is really a cost issue now. It used to be a philosophical issue. It used to be about global warming but now it's about not being able to afford insurance. It's about losing a couple hundred basis points in your supply chain. And by the way paying more for fuel and all of this stuff right. And and even with tariffs paying more to get product in. So like the advantage that the types of things we're focused on are is it it goes right at the cost and margins. And I do think increasingly climate is gonna be able to be understood as a cost issue

Tom Raftery: 32:00

Yeah. And you produced a study with Worldly saying resale can lower annual carbon emissions for premium apparel and outdoor brands by 15, 16% by 2040. What conditions have to be true for resale to deliver that kind of impact?

Terry Boyle: 32:19

That study was done before in my time but the theory is that if a company does a resale programme particularly one that works on trade-ins and essentially that trade-in program and plus what comes from the turn flow becomes like 30% of their business meaning like literally almost in some cases replaces part of the full price business with this business, the savings on what we do is about 50% carbon savings So when someone goes and buys something through resale they're saving about 50% versus if you had to build it new. That's the general kind of thinking. And so if your P&L is levered up to 30 points of resale and you're getting 50% carbon savings and you get into that that range.

Tom Raftery: 33:05

And if listeners stopped seeing returns as a failure of the sale, how should they start seeing, seeing them instead?

Terry Boyle: 33:14

well I mean it's hard not to see them as a bit of a failure I mean I think I think we don't solve every problem with returns right. So you kind of mentioned sizing That's a big problem. We can't really tell if something was necessarily mis sized right? There's other analysis you can do to be like Hey the baseline for returning on size issues is X percent and this style is Y percent. We should probably look at it. We can track lot numbers and manufacturers So we can actually give you the data that says this factory had 600 basis points more in returns on that item than this factory. You should look at that. So we can do that. But in general returns isn't as big a problem in a store right? The customer walks it back in. It's a lower number cause they've probably used the fitting rooms. It's not not a problem. Like we are seeing more clients say Hey we wanna bring the discipline that you have in the fulfilment centre into our back rooms. Because what they don't want to do is send all the imperfect stuff back centrally. They'd actually like to keep it in the stores save some money and and and sell it there. But e-commerce no question has increased the level of problem that you're seeing with returns. That is probably the biggest lever that that has moved the issue.

Tom Raftery: 34:28

And looking at the, trends in this space, where do you see this space going in the next five, 10 years? What are the big changes you see happening?

Terry Boyle: 34:39

Again I think you're gonna see a higher penetration of software products like the one that we have which is really automating everything that can be automated right now in returns area, measuring everything, giving great data on it, making that data accessible, integrating it with other parts of the company. I do think you'll see more hardware automation that will work in conjunction with those software systems by like 10 years out. Yeah those would be pretty specialised. We talk about em all the time. I think if you're gonna do proper condition grading you need to take a number of different photos from a number of different angles. And so how are you gonna do that. In 10 years you may actually have something that looks like a robotic system that is doing some of this processing

Tom Raftery: 35:21

Okay, And it's time now for the lightning round. So quick questions, one sentence answers you up for that?

Terry Boyle: 35:29

Yeah let's do it

Tom Raftery: 35:31

All right. Okay, good. First up, biggest hidden cost in returns?

Terry Boyle: 35:38

Losing all that margin because the product could be resold for more. And by the time you deal with the problem you've lost a tonne of the value.

Tom Raftery: 35:46

All right. Fast returns or accurate returns?

Terry Boyle: 35:50

I mean look they're both important. Fast, when you're dealing with something that has style risk is doubly important

Tom Raftery: 36:00

Alright. The most overrated resale metric?

Terry Boyle: 36:04

I think people tend to be very worried about cannibalisation, and the data suggests that actually it's a huge source of new customers

Tom Raftery: 36:13

Hmm. Okay. Interesting. What should never be automated?

Terry Boyle: 36:19

I mean I think we're gonna have a hard time actually automating critical intelligence at what I would call the management layer I think it's I think it's hard

Tom Raftery: 36:28

Okay. And what's the biggest sign that a brand is ready?

Terry Boyle: 36:34

For me any brand that is over a couple hundred million dollars in size should be doing this.

Tom Raftery: 36:41

Alright. And bold, take are free returns broken?

Terry Boyle: 36:46

Free returns incentivise bad behaviour, but I'm not sure if you wanna be competitive there's any option

Tom Raftery: 36:58

Fair enough. I wanna go back and dig into the one about, bringing in new customers. Can you dig into that one in a little more detail for me?'cause we haven't addressed that yet.

Terry Boyle: 37:08

Yeah One of the reasons I was excited initially about coming in to resale was I viewed it as off price with a better brand halo. What I mean by that is you were hitting the same price point as off price but you could keep it closer to your brand because it had this brand characteristic that was attractive to customers that wasn't price. They understood why the price was lower but that price was lower because of an environmental functional reason. And so if you could run your own off price like you can essentially in branded resale, it actually brings in a new customer and it's usually the next generation of your customer and you can graduate it into your full price brand And so to me that's exciting

Tom Raftery: 37:54

Interesting. All right. And a left field question for you. If you could have any person or character, alive or dead, real or fictional as a champion for returns, who would it be and why?

Terry Boyle: 38:12

That's an amazing question first of all, but I'm gonna I'm gonna need a second because, it's gotta be somebody that resonates in the fulfilment and finance world. It's been a long time since I wa I was like reading a lot of business books but there's probably I don't the only name that comes to mind is Michael Porter but I don't think he's the guy. But like someone like that who was like educating people on all the lost margin in reverse logistics that they could be gaining and really getting a mind share about it

Tom Raftery: 38:44

All right. Okay, cool. We're coming towards the end of the podcast now, Terry. Is there any question that I didn't ask that you wish I had, or any aspect of this we haven't touched on that you think it's important for people to think about?

Terry Boyle: 38:57

I do think this is the one opportunity and we touched on it that a fulfilment professional or even like a finance professional has to be more than just cost control and actually get into the business of generating more margin. And I think they can be leaders on it. They can bring the GMs and the marketing people and push them. And I think what's interesting about returns is we always joke it's like we've now identified all this imperfect inventory, how much margin do you want from it? Do you want 65 points of margin or do you want five or 20. I think that's a different kind of discussion that the fulfilment person can be a problem solver for. They can identify the problem. They can identify the potential solutions and they can facilitate it through. And now they're actually adding like faster speed to cash and they're adding real margin. And I think that's cool and and unusual for folks in that world

Tom Raftery: 39:57

Great. Terry, if people would like to know more about yourself or any of the things we talked about on the podcast today, where would you have me direct them?

Terry Boyle: 40:06

I mean for the company I would just go to trove.com. We've got a pretty educational website and you can check out more about our products and how we do what we do. And obviously I'm on LinkedIn if you want to come find me

Tom Raftery: 40:19

Brilliant. Alright, super. Terry, that's been really interesting. Thanks a million for coming on the podcast today.

Terry Boyle: 40:24

Thanks for having me Tom It's been great.