Returns are both a hassle and a significant expense for many retailers. Optoro, a reverse logistics company, has estimated that the cost to return a purchase averages 27% of the purchase price, which erases as much as 50% of the sales margin. And if an item can’t be resold or repackaged efficiently, it often ends up in a landfill contributing to mounting environmental waste.

Enter Disney Petit, founder and CEO of LiquiDonate, a platform that connects retailers with nonprofits to help divert excess inventory into the hands of those in need. Founded in November 2021, LiquiDonate reports that it has already kept over 11 million items out of landfills.

In this interview with Small Business Center contributing editor Rebecca Meiser, Petit — who during her time at food delivery service Postmates launched Food Fight, a program that matched excess food from partner restaurants with shelters in 700 U.S. cities — explains how LiquiDonate works, how it can help small businesses recover sunk reverse logistics costs, and how owners can get started.

Tell us about LiquiDonate.

It’s a software solution that enables retailers, brands, even event companies — anyone who has excess stuff — to simply go to a website, log in and list the product that they have that they would like to donate. Within seven days, the product gets matched and moved to a verified nonprofit who needs it using our logistics services. It’s easier than throwing it away and in most cases, it’s also cheaper than throwing it away.

The other product we offer outside of the warehouse tool is a returns platform that retailers can download if they’re selling on Shopify. We have an integration with Loop Returns and ReturnGO, which allows them to set up a custom workflow. So, every time a customer goes online to return a product that the retailer doesn’t want back at the warehouse instead of shipping it back for processing and often ultimately throwing it away, we instantly produce a shipping label for a nonprofit located within about 30 miles of the customer’s home, anywhere in the U.S. or Canada.

On average, we reduce the shipping distance for that product by 98% and we reduce the cost of the shipping label by 61%. It makes it much more cost effective and environmentally friendly. We also then fully automate the tax receipt on the back end.

Do you limit the types of products you will take?

We take everything. We’re completely category agnostic. Today, we have over 4,000 nonprofits in our network. People can configure donations by item, category or price point. For example, many of our retail partners start by automatically donating every item under $50 or anything in the clearance section, while sending everything else back to their warehouse.

Can you share examples of the return on investment or operational efficiencies that retailers have experienced by using LiquiDonate?

On the operational efficiency side, we have one retailer, for instance, where their shipping label normally would have cost them $15.22 to take the item from the customer’s home back to their warehouse on one of the coasts. As you might know, a majority of the warehouses in the United States are either on the East Coast or the West Coast.

But with our solution, it costs them $5.91 and that includes the service fee to pay us. So, they see this huge reduction in cost on the shipping label. There are also a bunch of soft costs that are difficult to calculate, because it [varies] retailer by retailer. Like, you pay someone to receive the product at the facility. You pay for someone to open it, you pay for them to look at it, you pay for them to restock it and then if they don’t restock it, you’re paying for them to landfill it. In those situations, there’s also a fee for landfilling. All of those soft costs are not even included in that 61% savings that we see on average per return.

Is there a cost for using your service?

There’s a cost for donating using the warehouse tool. We have a pay-as-you-go platform, so we don’t lock you into a contract. You can use it just when you need it. We also have a subscription model. For example, if you download the Shopify app and plan to use it regularly, we charge $75 a month, which includes a certain number of donations.

It’s all customizable [based on] how often you’ll be using it. I don’t want to quote exact pricing, because sometimes it changes. But all the pricing details are available when someone contacts us.

Walk us through the process.

On the return side, if you’re the consumer you won’t notice anything different from a regular return. We focus heavily on ensuring that the decision is in the hands of the retailer. So, if you’re the customer you go online and want to return a product — say a pair of headphones. You visit the website, select the return reason and then, in the back end if the retailer is using LiquiDonate, the system will say: “Based on the information provided, we actually don’t need these headphones back, but they’re still in usable condition, so let’s ship them to a nonprofit.”

Our system will then instantly generate a shipping label for a nonprofit within about 30 miles of the customer’s home. The customer won’t know it’s going to a nonprofit unless the retailer decides to inform them or if they look up the address on the shipping label. The consumer experience remains the same, and everything is handled through the shipping labels. If the item is oversized, like a mattress, we show a pickup scheduler where the customer can specify a time range for a courier to pick up the item. We’ll then transport it directly to the nonprofit.

On the warehouse side, our tool offers options for pickup, shipping or delivery. For pallets, since that’s the most common packaging at the warehouse, we either coordinate a truck to pick it up and deliver it to the nonprofit on behalf of the retailer, or the nonprofit comes to collect it themselves. In many cases, nonprofits will de-palletize the goods if they don’t have the proper vehicles. Nonprofits need these products and are willing to do whatever it takes to get them.

How do you match retailers with the right nonprofits?

The key is our proprietary matching algorithm, which is really our secret sauce.

Three main factors drive the algorithm:

• Is this product something the nonprofit wants?
• Is the nonprofit nearby? We prioritize local donations to save on both shipping and environmental costs.
• How often has the nonprofit received a donation from us? We aim for equitable distribution of goods.

All of this happens in less than a second.

If a retailer has a specific issue area or cause they want to support, we can narrow the nonprofit options accordingly. But we usually encourage leaving the algorithm as open as possible so it can work efficiently and keep costs down. That’s especially important because when it comes to returns, the biggest concern for retailers is price, particularly the cost of the shipping label. If a more targeted donation requires shipping something farther away, we’re happy to accommodate that, but it may affect the ROI.

Does a retailer need to be a certain size for this to work for them?

No, not at all. We have some retailers using our Shopify app for returns who process between one and 10 returns a month. Others process one to 10 every hour. Since it’s software, it’s infinitely scalable based on what they need.