Javelin is thrilled to partner with Rachelle Snyder and Ross Richmond in co-leading Arrive’s Series A, along with our good friends at Climactic Ventures. The following is our thesis behind the investment — read on to learn more about why we invested, the market pull driving adoption, and why Arrive is well positioned to be a category leader in the rapidly evolving recommerce industry.
The Cost of Convenience
It would be hard pressed to find someone who does not love the convenience of e-commerce. Hit a button and the product shows up on our doorsteps — what’s not to like? Don’t like the product for any reason whatsoever, and returns are nearly just as easy. A great thing for consumers, but not quite as great for brands and the environment.
The proliferation of digital storefronts and improved logistical capabilities have made online ordering akin to a basic utility — and a brand cannot even imagine a go-to-market strategy today that does not include eCommerce.
Customer experience is first, they say. Everything else will work itself out if there is customer love. And while we don’t disagree that stellar customer experience is a north star every business needs to strive for, we also believe that brands need to find a better way to manage all the inevitable side issues that develop when ordering and returning items is just a click away. These include margin concerns, environmental concerns since so many returns literally get destroyed and incinerated, as well as merchandising concerns, such as brand and price protection, and avoiding cannibalization.
Let’s start with the waste problem: in 2022, returns cost retailers $816B in lost sales, a 2x increase from 2020. On average, ~30% of returns ($816B in aggregate in the US) are marked as non-new and cannot be returned to stock as new. These products regularly make their way to landfills and/or incineration centers. Optoro estimates that in 2022, about 9.5 billion pounds were discarded this way. That’s tragic. We can’t imagine that the brands would want their consumers to know they were discarding usable products.
But the other options to handle non-new items are horrible for brand protection. Sending a lot of near-new products to heavy discounters would quickly dilute brand status as well as their ability to maintain price points. Even if that wasn’t the case, the margins of such transactions are so low, that there really isn’t much incentive to pursue warehouse/bulk/discount sales.
If brands can’t burn/trash returned products, nor bulk sell them, what should they do? If they wanted to re-merchandise the products, keeping in mind brand protection, price protection and the many complexities of taking in and evaluating products as single SKUs for resale, then they would need a very sophisticated software platform to do so. And they would also need some guidance on how to make sure they don’t inadvertently cannibalize new sales.
That’s where Arrive comes in.
The Arrive Platform
Arrive is a recommerce platform that enables brands to resell returned items that have signs of use or damage, or are still perfect but can’t be sold as new, by utilizing a combination of logistics software and online distribution.
Arrive provides the back-end technology to brands to process returns in either their facilities or their designated third-party logistics (“3PL”) warehouse facilities.
Once a return is categorized as ‘non-new’, the warehouse operator utilizes Arrive’s technology to sort items in tiers with ratings and associated pricing, enabling a key capability to sell non-new returns as unique units of inventory. The items are incorporated into the Arrive-powered, recommerce dedicated digital storefront to provide discount or-environmentally conscious customers a more sustainable choice of products.
The value proposition to brands is two-fold: i) Arrive turns a cost center into a high-margin profit center by diverting non-new returns to resale on the brand’s website, and ii) Arrive helps brands hit sustainability goals by effectively dispositioning products.
With the reduced-price tier, Arrive helps these brands target a different customer demographic that are interested either in achieving favorable pricing or in resale products that are better for the climate, without cannibalizing the core customer segment.
Arrive’s plug-and-play platform is comprised of three core product elements:
- Recommerce Management System: rules-based warehouse management software allowing for single SKU itemization. The system identifies, grades, and routes products, as well as integrating with the brand’s product catalog.
- Ecommerce Storefront: scalable content management technology that powers a brands resale re-commerce experience. Embeds the digital webpage in native brand website and displays different conditions and price points of items.
- Full Stack Analytics: enables brands to strategically grow by providing front-end ecommerce analytics as well as back-end operational data.
Arrive’s modular Recommerce Management System can be implemented in any warehouse, anywhere in the world. 3PLs are incented to work with Arrive as the Company enhances the facility’s capabilities to service non-new returns and thus grow overall 3PL revenue. In fact, we believe that this functionality will become a must-have for 3PLs to retain their brand clients in the near future.
Arrive also partners with returns logistic platforms such as Loop Returns, Optoro, and Happy Returns. Returns logistics software like Optoro works with brands to process their returns with both physical operations and technology.
Customers such as YETI, The Citizenry, Burton and more are utilizing Arrive’s technology today to power their recommerce goals. These brands recognize the importance of operationalizing a brand-protected re-commerce strategy whilst growing a new revenue channel and improving margins.
The Recommerce Industry
In 2023, the “recommerce” terminology gets thrown around a lot but re-selling non-new returns is surprisingly relatively nascent. Key solutions to date have been focused on customer take-backs and trade-ins (Trove, ThredUp), or in powering peer-to-peer exchanges directly (Archive, Recurate, Treet).
Whilst Trove and Thredup are the closest competitors to Arrive’s offerings directly working with brands, they do not currently integrate into a brand’s existing 3PL or warehouse facility. The experience is much harder to safeguard for the brands, and isn’t nearly as good for consumers.
ThredUp will facilitate a used product trade-in in exchange of store gift cards — they take on most of the logistics work (inventory sourcing, processing and quality check, customer care, resale shop order fulfillment, storage) unlike Arrive’s scalable software-only business model.
An estimated 82%, or 272 million, Americans buy and/or sell pre-owned — about the same number of Americans that own a smartphone.
93% of Americans say inflation impacts their decision to buy and sell pre-owned goods, with an increasing emphasis on making and saving money accelerating the growth of Re-commerce.
In addition, 76% of items bought and sold pre-owned are not apparel and instead fall into the categories of electronics, furniture, home goods, home improvement, sporting goods, outdoor equipment and auto parts, broadening the scope of product categories Arrive can power.
According to Statista, the Recommerce market size in the US in 2022 was ~$180B, growing to $245B by 2025. This includes all form factors of selling previously owned goods — trade-ins, peer-to-peer, brand managed, etc.
Arrive’s target market is non-new returns which in 2022 was a $245B industry, 30% of the overall $816B in total returns in the US. The market is growing rapidly across categories; for example the resale segment in clothing is expected to grow 11x faster than broader retail in clothing over the next few years.
Recommerce is growing, and why Arrive is positioned to be the category leader
Arrive is capitalizing on the behavioral mindset shift of consumers that reusing products is not only better-for-the-climate but increasingly on-trend. Single SKU ratings and merchandising is difficult for both the brand and their 3PL partners, thus driving the demand for a platform like Arrive.
It is also inevitable that all ecommerce companies will have a Recommerce strategy beyond peer-to-peer. Peer-to-peer players typically cater to much older products, usually with more damage, and tend to not do the brand justice at all, particularly those with a higher price point.
For many brands, margin and sustainability will be the key driver. They can’t keep throwing away or incinerating perfectly usable products. Sending bulk “almost new” products to a deep discounter is horrible for the brand and for the protection of their price point.
Arrive is helping the brand better manage and hit sustainability goals by effectively dispositioning products. Javelin believes the ease of use of the Arrive back-end technology and the clear value proposition for ecommerce companies in unlocking new revenue — while protecting the brand — will allow for the platform’s fast scalability.
We are thrilled to partner with Arrive — their mission towards more sustainable commerce; software first product positioning; the massive tailwinds and market opportunity in recommerce; focus on direct integrations with 3PLs and WMSs; and a multi-pronged go-to-market strategy made Arrive an attractive Series A investment for Javelin.
-Jed Katz and Tasnia Huque