Last-mile delivery is a two-way street. Often, what people refer to as the final mile of the supply chain is also the first mile of the reverse supply chain, the part of a company’s logistics network that handles things like product returns.
As more and more customers are sending e-commerce orders back to retailers, the returns space has heated up, with companies like Optoro, Happy Returns and myriad others carving out niches. But there’s a new face in town.
Tern, a technology company based in Palo Alto, California, that was founded just last year, threw its hat into the reverse supply chain ring this week. The young company announced the launch of its flagship home pickup service and a logistics partnership with Swap.com, an online consignment store for pre-owned apparel, the product category with the highest return rate in the U.S.
As part of the announcement, Tern also revealed that it had received $5 million in seed funding from a raise led by Resolute Ventures and Rajesh Ramanand, co-founder and CEO of Signifyd.
Skye Spear, co-founder and CEO of Tern and a veteran of Signifyd, got the idea for a home pickup service during his time at the e-commerce fraud prevention company, where he worked in cybersecurity and had access to unique insights from merchants.
“Really good, efficient merchants had a handle on not only the front side of their logistics stream — so fulfilling orders, getting people to their site, conversion, that type of stuff — but they also had a really good handle on the back side of that commerce curve,” Spear recounted to Modern Shipper. “And by back side, I mean everything that happens after the transaction takes place, so returns, reverse logistics, customer management, customer satisfaction, all that stuff.”
The consumer-facing portion of Tern’s offering is a home pickup service, which allows users to schedule pickups through an app without having to worry about providing packaging or shipping labels. In home pickup, Spear saw the opportunity to flip what he sees as a merchant-centric returns model — wherein customers are expected to return goods to the store, or wherever else they received the product — on its head.
“It functionally works. But I don’t think it addresses the real consumer pain point, which is this idea of convenience,” he explained. “As it turns out, people purchase more when they have a good safety net. They try new brands more regularly; they go back to merchants because they know that the returns experience is fine.”
That level of convenience in the returns process is half of Tern’s value proposition for merchants, the other being the ability to reduce their carbon footprint. By consolidating pickups across a region, Tern reduces the number of trips and miles traveled.
The company claims it can reduce carbon emissions over the first mile by “orders of magnitude” compared to the current hub-and-spoke model, which necessitates several trips that aggregate returns at a central location, or hub.
“What’s important to us is solving the merchant’s problem in a way that’s really good for consumers. We want to make this a consumer-centric experience because we think ultimately, that benefits merchants. And we want to do it in a way that also benefits the environment and benefits the communities that we’re serving,” Spear explained.
Watch: The rise of vehicle home delivery
In developing the service, Spear looked at the user interface of an app like DoorDash (NYSE: DASH) — which ironically is looking at adding its own returns service — for inspiration, but he made a distinction between third-party delivery apps and Tern’s offering.
“It’s probably functionally closer to something like scheduled pickup with FedEx or UPS,” he noted. “But there’s no good front end for any of those — if anyone’s ever tried to schedule a pickup with FedEx, UPS or USPS, it’s really kind of a nightmare.”
Like DoorDash, Tern emphasizes communication between the customer and the courier. The app alerts customers when their order has been received, when the courier is close and when the item has been picked up.
But unlike the food delivery giant, speed is less important than convenience because customers typically don’t care when their product is returned — they only care about getting their money back. Spear added that Tern is looking to incorporate more alerts that communicate when the merchant has received the product and when the customer’s refund is being processed.
Also unlike DoorDash, Tern has its own internal fleet of vehicles and full-time drivers, a deviation from the widespread gig economy model that leverages independent contractors, who often supply the vehicles themselves.
“Our fleet right now is entirely internal for all our endeavors,” Spear said. “We do that intentionally. We wanted to learn something about the process, about where the sticking points were, where the hurdles were, what people really want, when pickups are happening.”
Prior to Tuesday’s launch, Tern trialed its flagship offering through an invite-only beta with customers and merchants in the Bay Area. Spear plans on using Tern’s success with those merchants as a jumping off point to serve their customers’ other markets, but expansion is just one area in which the company will deploy its new funding.
In addition to building out its engineering, sales and operations teams, Tern will use the money to attract customers in both new and existing markets.
“The next four to six quarters are really about doing a bunch of experimentation on customer acquisition and figuring out how we can get good density in the regions that we serve right now,” Spear explained.
Those efforts might receive a boost though Tern’s partnership with Swap.com, also announced on Tuesday. Swap.com is one of the largest online consignment retailers in the U.S., building its inventory from pre-owned apparel and accessories, and it will now offer Tern’s home pickup service to sellers that want to list their clothes on the platform, as well as to buyers who want to make a return.
“One of the things that sets Swap.com apart from other consignment platforms is our relationship with our customers. Through our partnership with Tern, providing a home pickup service for consignment and return will give Swap.com just one more way to connect with our customers,” said Antonio Gallizio, board member and chief commercial officer at Swap.com.
Spear emphasized that the value of Tern’s home pickup service goes beyond convenience. With about $761 billion worth of merchandise being returned in 2021 alone — a nearly 78% increase year-over-year — reverse logistics necessitates more trips than ever before, which means more miles traveled and more carbon emissions.
Mike Hirshland, co-founder of Resolute Ventures, the company that led Tern’s $5 million seed funding round, noted that the company’s potential to help businesses meet sustainability and ESG goals was a big reason for the investment.
“We are thrilled to back Tern and Skye, as his passion for the sustainable evolution of commerce will help both consumers and merchants leave a smaller environmental footprint,” Hirshland said.
Home pickup services from Tern are now available in “a number of key regions across the U.S.,” the company said, expanding outside of the Bay Area with the new funding.