Rundown: UPS acquires Happy Returns, Unilever offloads Dollar Shave Club & Sears attempts a comeback

0:05Hello and welcome to the Modern Retail Rundown. I'm your host, senior reporter, Gabby Barco, and I'm here with editor-in-chief, Kale Guthrie-Weissman. Hello, Kale. Hello, Gabby. That was a flat hello, but I'll take it. Hello, Gabby. This week, we are going to be talking about, I mean, I feel like we've been talking about M &A a lot lately, but times are tough. I think that's what we're in right now, M &A. Yeah. Yeah. So first up is UPS acquiring happy returns from PayPal. Then Unilever selling off Dollar Shave Club. That one's going to be an interesting one to get into. And finally, we asked the question, is Sears having a revival?

0:59Stay tuned. So first up is UPS. So yeah, this one, I guess it was somewhat of a surprise, but we have seen the reverse logistics category kind of, I don't know, lose steam in the last year. So yeah, it's Happy Returns, for those who don't know, is a reverse, I mean, it's essentially a returns vendor that a lot of big retailers have been using over the last few years. And it was acquired by PayPal for an undisclosed sum in 2021. This was at the height of the logistics boom. But now UPS has bought it. And I mean, I think it's pretty obvious to say that UPS seems like a more obvious choice to be a parent company.

1:50But what are your thoughts? Yeah, I mean, I think this is indicative of the times we're in, especially, you know, for these back-end services, there was so much interest and there was so much buying and investing, you know, starting in 2020, going through 2021, 2022, for these types of service because they were in such high demand during the pandemic. You know, e-commerce sales skyrocketed. People wanted to return their items, have all parts of the e-commerce shopping process be as easy as possible, as streamlined as possible. But, you know, the dirty truth about all of this is that this costs money and it requires manpower and it, you know, it just is such a physical investment and requires such category and operational knowledge that, yeah, I guess this is not surprising.

2:42You know, PayPal is a big company. And so clearly, maybe they looked at their, you know, all of their various businesses, how they're performing and were like, we can't keep doing this. And as you said, I agree, like, it's a smart decision for a company like UPS to be doing this because this is very much its bread and butter. And it's trying to continue it, you know, competing with FedEx, with USPS, with, you know, all those others. And so, but I think that there's a backdrop behind this, which is that there is big consolidation and offloading and a realization that specifically logistics companies aren't going to be huge profit centers, or at least not right now.

3:23And so look at Shopify unloading Flexport earlier this summer. I think that's a very similar situation to this, where there was a parent company who was mostly focused on one thing, and that thing was not really involved with the physical transfer of goods. It was much more of a digital company. And it bought these companies with the understanding that they would, you know, they would help them control more aspects of the process, have a little bit more control, seem a little bit more unified. But then they were like, oh, my God, this costs so much money. We are losing so much money and the economy is not good right now.

4:00We need to get rid of these businesses. And so that's what I think this is indicative of. But yeah. Yeah, because these, you know, I think unlike software or maybe other SaaS providers, logistics is a big undertaking. So, yeah, when times were good, everybody was calling them these future investments, right, like long-term investments where they wanted to own their returns, which we talk a lot about. I think it's one of the biggest problems for retailers right now. But, yeah, it doesn't seem like the acquisitions are working out. So similarly, a firm bought Returnly, which is also another returns platform in 2021, and it essentially just shut it down for$300 million, and it shut it down this past May.

4:52So it seems like, unfortunately, a bit of a trend. It just happened to be another finance company that was trying to get into this, which brings us to the concept of this super app. Right. Where I think like Shopify is the big prominent name in the space and they do it pretty well for the most part. But even they're not immune to to not being able to, I guess, like focus enough attention on multiple sectors, including, you know, things like logistics. Yeah. God, Gabby, I could talk to you for days about super apps, but like the dream of digital, you know, of apps, they've been this way for, you could even say a decade where over the years, there's a company that says we're going to have every part of this service in our specific app and you'll be able to do it.

5:45But Facebook is actually a really good example with Instagram when it tried to make itself a shopping app and do all these different things. But often over the years, this has not worked. PayPal was actually the one that people were looking at just because it was such a big company. It had such a stronghold on the payments ecosystem that maybe it could do it. And so PayPal does have an app that is more or less unified. tried it try what what paypal says its super app is is that you can you know you can do payments you can pay bills you can buy crypto you can shop and then also now probably not anymore you could handle returns with paypal but you know others actually a firm's a great example where a firm has tried to have this quote-unquote super app that just brought it all into one place but every time a company has done this it has not gone as perfectly as the company expected and there have been changes.

6:42There have been tweaks. They've realized that they're a little bit too far out of their realm and that they don't know enough about whatever that segment is. I don't know, even X, formerly Twitter, like, isn't that exactly what Elon Musk is trying to do right now is make it a quote unquote super app. But I think that with PayPal offloading happy returns, when it was purchased in 2021, this was the glowing example of, you know, we're going to bring all of these aspects of, you know, of digital life into our specific ecosystem. And clearly that did not pay dividends for them, for PayPal. Yeah. And so I do wonder what this means for, I mean, I think, you know, we still have to see, but it sounds like maybe UPS might bake happy returns into its existing system or, I don't know, maybe just continue to operate.

7:38it. We don't have a lot of information, but what are your thoughts on like a carrier, I guess, you know, handle or just being, yeah, acquiring companies like these compared to sort of like companies that are more on the e-commerce side and yeah, software side. And yeah, I'm actually just going to make a quick correction from the thing I said earlier. I said a firm was trying to be a super app. It's actually Klarna and I mixed those two up. There's the two companies up because bnpl is one giant bubble yes flarna was the one that wanted to be a super app but i don't i can't think of anything they've offloaded recently but either way um to your question i think a it makes a lot of sense for ups or a carrier to do this um for happy returns most of its quote-unquote return nodes or i think that's what they call them whatever places where where if you bought something online and you want to easily return it um usually it would be a retail store or, you know, some other physical partner that a person could go in, give their stuff, and then Happy Returns would handle the rest.

8:43And a lot of it focused on sort of major, I guess, chain retailers. I think in 2020, maybe it's 2022 or 2021, or it partnered like with Ulta, for example. And the idea was Ulta has a lot of stores. People go to Ulta a lot. So if you bought something online from some other brand, you could go to your Ulta store and then Happy Returns would return it. And whenever you saw a new press release from Happy Returns, it would talk about the thousands of locations that it had in the US. And they all usually pointed back to a new partnership with a store, a new partnership with some public-facing physical place.

9:20But with UPS, A, there are UPS stores for one thing. But also UPS has been doing this type of thing for a long time. I've had my packages picked up from me from UPS before for a fee, of course. But this is something that it knows how to do. It already has it in place. And in the press release, it already said that the UPS stores are going to be added to the Happy Returns thing. I'm trying to find the number right now. I think it says that Happy Returns used to have around 5 ,000 locations you could participate in. soon, according to UPS and Happy Returns, it'll be over 12 ,000. That's a big increase.

9:59But I also imagine for a company that already does deliveries, a carrier service, probably they'll try to integrate this into that aspect of it as well, which would make sense for a service like Happy Returns. So it just seems like there are a lot more parts of the business that align. And these are a lot of parts that UPS already knows about and can probably invest in more easily than a company like PayPal. I think the implication that, you know, they know about it, I think when we say that, it's that they have experience and they have the infrastructure. I think that's the big one. Exactly. Yeah.

10:42Talking about trucking and moving things across the country. Yeah. And as much as they want that to be digitized, it still requires literal people, despite all the robotics companies you read about, and it still requires trucks, and it still requires fulfillment. It requires all of these things that a digital company like PayPal just likely did not have in place when it first acquired a company like Happy Returns. Right, yeah. Unless we somehow get to a point where we could turn packages into the metaverse, this will continue to be a heavily physical business. Up next, we are going to be moving into Dollar Shave Club.

11:25This is a big story this week out of the DTC world. Unilever sold the majority stake of Dollar Shave Club to a private equity firm called Nexus Capital Management. It is a big deal because the brand was acquired in 2016 in a billion-dollar deal. This was only five years after it launched DTC. Yeah, I mean, it just sounds like it wasn't a good fit and Dollar Shave Club just was not able to grow under this multinational conglomerate as well as they hoped. Yeah, I mean, I think it's probably giving some people in the industry pause just because this was always the example of the most, I guess, the most parsimonious exit a brand like Dollar Shave Club could have where you grow your DTC.

12:19And then, I don't know, if you look at all the debacle that happened with Harry's, it's become difficult for a company that reaches a certain scale and that wants to keep growing. You either go public or you get bought by a major conglomerate. But the fact that Dollar Shave Club was unable to perform under this major CPG giant shows that this pathway to growth might not be best for these types of brands, at least in this case. Yeah. And because it was built on a direct-to-consumer model and didn't move, at least according to reports, it didn't really go into retail until much later. I believe it was actually even after Perry's got into Target, which was kind of like the big turning point for this category.

13:07And then, of course, being under Unilever, you would think that would have accelerated, but it seems like maybe the focus was on continuing to grow e-commerce. But as we know, a lot of challenges started. I mean, since 2016, the DTC model has changed a lot, and that's an understatement. But yeah, it's just a lot more expensive to do business online. And so I think maybe just didn't perform as well as they thought it would. Yeah. And I think that especially for Unilever, it's, you know, overall, I think reported general sales growth, but like there have been things that are underperforming and it sounds like its beauty section specifically has been underperforming.

13:52performing. For example, from this story from WWD, which reported the acquisition as well as Unilever's overall earnings, it said that the beauty and well-being division accounted for 20 % of its turnover, but that turnover was down 4.9 % on a reported basis. So that shows that that segment of the business is overall not doing as well as it was a year ago. And I'm sure that there are macroeconomic things at play. But when you have a company that you bought for a billion dollars, you want that to be one of your shining stars, one of the leaders in the space. And I guess that has not been what's going on.

14:32Yeah. And turnover, for those who don't know, is essentially revenue or sales in UK terms, right? Europe? I think so, yeah. Yeah. Yeah. I remember it took me a few times to remember that. So, yeah, I think with that said, it is interesting. So, you know, they will maintain a 35 % stake, but this new private equity firm has, sounds like they have plans to kind of pick things back up with Dollar Shave Club. But yeah, what are your thoughts? I mean, you know, this seems to be a very popular trend in the DTC world. Is that safe to say? Yeah, I mean, I think that offloading, underperforming assets is definitely a trend in the business world as a whole.

15:22I mean, like, we don't know exactly what they're going to do with it, what Nexus will do. They, of course, say they have big plans. But I imagine, I don't know, this seems like if you're at Dollar Shave Club, this probably isn't the best news just because, you know, your best shot is a trend. at growing is when you live underneath one of these companies where all they do is they think about the category and selling these types of goods. And so if that didn't work and you're being sold to a firm, it just shows that times are really tight right now. And there's probably going to be some big changes when you have a PE firm running you, is my guess.

16:07But what do I know? So, yeah, I mean, it sounds like also Unilever is just going to be focusing on its core brands, its 30 power brands, as it calls them in its portfolio. And, you know, they're pretty big. You've got your doves. You've got, yeah, a lot of the big drugstore brands. So we'll see what happens with Dollar Shave Club. I'm curious to see whether they lean further into e-com or go into retail. One other thing I wanted to mention is that there was some other reported, quote unquote, mistakes that the company made in the last couple of years, which was to product category expansion, like adding fragrance, like$50 colognes, which I think probably maybe didn't work out well.

17:02just because it's a very different proposition than what, I mean, dollar is in the name. So, you know, maybe it's a little hard to sell luxury. But yeah, it sounds like maybe it's like kind of back to the drawing board. Yeah, I just, I guess with that, I think there were probably, and we could talk for a lot about, you know, the strategic mistakes that either Dollar Shave Club made, or a lot of these, you know, darlings from 2015, 2016 area that have tried to grow and keep their essence, but also be a national brand. And I think the fact that Dollar Shave Club was unable to reach the ubiquity that a Dove is, I think is telling just about if a lot of these brands, given how they've grown, how they see themselves, a lot of their choices as business models over the years, that they might just hit a wall.

17:56You know, what a Unilever wants is it wants all of the brands that it buys to be ubiquitous, to be available in every drugstore. It also wants them to have brand equity and to be considered nice. But like the DTC proposition was that it has beloved customers, maybe not as many as, you know, tens of millions or hundreds of millions, but people who will constantly be going back and they have a direct line to them. But what Unilever wants is just a company that sells and people think is synonymous with whatever that category is. And so maybe there's just sort of a friction there that we're now seeing that, you know, we might be seeing more of down the line.

18:38So going in a little bit of a different direction, you know, Sears, don't call it a comeback, et cetera, et cetera. Don't call it a comeback. We won't. But yeah, it sounds like they, you know, Sears is always this like retailer that's on the back burner. Like we just, I feel like we never really know what's going on with it just because it's, there's now only about 11 stores, which is a huge, huge difference than maybe when we were growing up and going to Sears, there's hundreds of them across the country and they kept closing. But this week, it sounds like one store in Burbank reopened after it seemed like it was closed for good at the end of last year.

19:23And now it's reopened. There's some theories about why that is. But Sears still seems to want to have some kind of presence, which I find really interesting. Yeah, I mean, Sears is the example of the zombie retailer, which is the retailer that everyone thinks is dead. is if you compare it to its earlier glory, like pretty dead. But also like every once in a while, there is something there that happens that you're like, oh, it's still around. Like for instance, I didn't, you know, maybe this is a bad thing to admit, being a co-host of a retail podcast, but I didn't realize that it even had that many, you know, it doesn't have that many, but that even had any locations still open.

20:06And so when you hear of one opening, you're like, oh, I didn't realize that was still around. But like, it's also, it's one of those stories and it's an old story specifically with the retail, which is a company that was unable to update its business model, filed for bankruptcy, was bought and sold in many different iterations, has been broken up into different, you know, different slices and dices of the company. And so right now, it's owned by a company named Transform. Is it Transform Co.? I need to, yeah, I believe so. Which was one of its ex-CEOs, and it's both Sears and Kmart, another company you didn't realize was technically still around.

20:44But for the most part, the headlines, if you do any Google search about Sears, it's that it's closing stores. Every year, it's like, these stores are closing, these stores are closing. But the company, I guess, does still have some of them open. and keep saying that there's a more streamlined strategy on the horizon. I don't know if this opening is that streamlined strategy, but it is noteworthy to see that this did happen. Yeah, the idea is that it's about having a smaller footprint, bigger stores, but fewer locations, as opposed to, I think we could say the inverse of that is what Target does in big cities, which is have these small micro stores.

21:27a lot of them very close to each other. And so that's interesting. Yeah, because then I think that's what's making this confusion, I think maybe is that a lot, maybe like most of the population doesn't realize it because they don't live close to one of the 11 stores. But the reopening, I think maybe we, I don't know if we can call it that even, it sounds like it's not, it's not voting well. I mean, there's been interesting reports about just looking sad and having empty shelves and stained carpets, which I thought was an interesting detail that some customer reported. So yeah, I don't know. Thoughts?

22:06Yeah, I mean, I think that it sounds like not a great deal of thought went into what this reopening would look like. There's no grand rebrand of Sears. If you look at the pictures in these articles about it, it just looks like a depressing Sears. And so... But there is a welcome back sign at the entrance. You're right, right. I stand corrected. But like, it's very interesting that the focus is supposedly on fewer bigger stores when one of the big issues with Sears has been its overall retailing model and its overall merchandising model. And the pictures were of empty shelves. So it's great to have a really huge footprint.

22:50But if you can't fill that with things to sell, what's the point? And, you know, it's been open for a few days, so who knows what's going to actually happen. But I don't know. It's just, it's pretty wild to see these pictures and then remember, oh yeah, this existed. Especially when you think about, you know, Sears was the anchor, the anchor tenant for most malls back in the day. And now a lot of those stores are either completely closed or have transformed into something else. Yeah. Yeah. This one is 130 ,000 in square feet. So that's a lot of floor to cover. That is a lot of floor to cover. So, you know, we'll see.

23:29And so with that, that's our show for this week. Please write and review us on Apple Podcasts, Spotify, or anywhere else you're listening. Also, don't forget to subscribe to the Modern Retail Podcast to hear interviews with retail industry leaders. That comes out on Thursday. Cale, do you have a preview for us? Who do you have on next week? Yes. Next week, I'm talking with the CEO of the HomeGood Brands, Koyuchi, which has been around for a really long time and has a pretty fascinating story. So check it out. Cool. Yeah. And so we will see you next week. Come back on Saturdays for the Modern Retail Rundown.

24:06Thank you for listening.

24:19Thank you.