Scaling Loyalty: How Torrid and DHL Redefine Returns in Modern Retail

1 - > Welcome to All Business. No Boundaries., a collection of supply chain stories by DHL Supply 2 - > Chain, the North American leader in contract logistics. I'm your host, Will Heywood.

This is 3 - > a place for in-depth discussions on the difference DHL makes on your supply chain challenges. 4 - > Today's episode is : How Torrid and DHL Redefine Returns in Modern Retail. Let's 5 - > dive in. Today's episode is all about partnership and scale in modern retail.

Torrid operates at the 6 - > intersection of digital growth, store presence, and fierce customer loyalty. Product returns 7 - > play a critical role in that experience. We'll explore how Torrid's business model has evolved, 8 - > why returns became a strategic focus, and how collaboration powered a major transition 9 - > behind the scenes. So, I'd like to welcome my guests today.

We have John and Ryan. And 10 - > we'll start off as we always do. I'll ask you each to introduce yourselves. So, your name, your role, the company you work for, and 11 - > with you.

Yeah. So, my name is John Ball. I'm with Torrid. I've been here approximately three years 12 - > and I'm Vice President of Supply Chain.

Terrific. Ryan, over to you. Yeah, I'm Ryan Dupuis. I've 13 - > been with DHL for about 18 months now.

We were acquired in January of last year. I've been part 14 - > of the DRN organization now for 15 years and my role is the Director of Product Solutions 15 - > and Onboarding. Okay. Terrific.

Well, thank you both for being here. I've been looking forward to 16 - > this discussion. We had an episode covering the DRN probably about a year ago. So, it's nice to 17 - > pick up and have a live customer along with us this time.

Maybe before we get further, Ryan, 18 - > DRN stands for? Yeah, great question. DRN is the DHL Returns Network. Okay, John, some of 19 - > our listeners may not know all about Torrid.

So maybe let's start there with what is the company, the brand, who are your customers, approximate 20 - > size and scale, you know how you guys define yourselves in the market. Yeah, great question, Will. 21 - > Torrid is a leading fashion brand dedicated to helping women in sizes 10 to 30 look and feel amazing. And we serve a very loyal customer base.

not only through our digital side, but we also 22 - > have storefronts across the United States. You know, we really focus on destination for fit, 23 - > style, and community is our our main thing. We're about a billion dollar a year company. We have 24 - > 450 stores and then we have our our web business which is coast to coast and actually worldwide.

25 - > So we have do have stores up in Canada along with the United States and you know, it's been a 26 - > great experience for me to be here over the last three years and, by the way, I'm very pleased to 27 - > be on your podcast today, too. Oh, we're happy to have you on it. And you're based out, you 28 - > were telling me, you're based out of Columbus, Ohio. I know you've been in the industry for a 29 - > bit.

So pre-Torrid, what were you doing? Yeah. So, you know, I've had the great pleasure and I don't 30 - > want to date myself here because I know Ryan's on the call. He's one of the young bucks coming up.

31 - > I've been a distribution logistics leader for many years. I've worked with global brands such 32 - > as American Airlines, Frito-Lay, PepsiCo, Ride 8, Big Lots, and Torrid. You know, really 33 - > my specialty is high volume distribution, reverse distribution and pharmacy operations. 34 - > And I probably led you know a lot of different teams but you know my main focus is always peak 35 - > performance and optimizing supply chains to keep the business moving.

Okay. So you mentioned 36 - > returns in there and that's where we're going to focus today. How does Torrid approach product 37 - > returns as a business requirement overall? What's been your experience over your three years there 38 - > John?

And then how did the two organizations come together in the first place? Yeah. So, you know, 39 - > I've been very fortunate to been associated with a lot of in-house returns and out-of-house returns. 40 - > We actually, returns is always one of those back in the house situations and people really 41 - > don't look at it that much.

It's just there. We utilize it for our customer loyalty. Our goal is 42 - > to if a customer orders something and tries it on and doesn't fit or they don't like it, we allow 43 - > them to return that and they can either return it at a store or they can return it directly to 44 - > us. So when it does get returned back to us, of course, the customer wants to get the refund as 45 - > quickly as possible.

That's one of the things we try to do is try to get a return back to the DC, 46 - > get it refurbished and all that process and then be able to give that customer credit back onto 47 - > their account. At the same time, we are always looking to utilize our returns back into the mix 48 - > of our operation. So we want to look at getting that item back onto the web and up for sale 49 - > again. When I got here three years ago, we had an in-house returns processing system.

I think it did 50 - > well on the low time, but scalability was very, very difficult. And one of the things we did find 51 - > is that when business, start hitting different peaks during the year, returns would get pushed 52 - > off to the side and then you begin to get backlog, which would associate issues with getting customer 53 - > credit and things like that. So we began to go out and look. We found DHL as a partner.

We talked and 54 - > then we came to you know, they could suffice what we needed to do, which is A process the returns 55 - > and get the credit back to the customer as quickly as possible and then actually get the item back to 56 - > us so we could put it back on the web and resell it. So, it was one of those partnerships that 57 - > I think when we started discussing this stuff, it was going to be very quick. It actually turned 58 - > into a little longer than we anticipated, but again, they satisfied a niche.

At the same 59 - > time, by doing that we were able to have a huge cost savings in the first year and actually 60 - > we're seeing the same cost savings in the second year. So again, it's cost mitigation. At the 61 - > same time, we're able to turn our inventory from the returns back into the operation to get 62 - > it back on the web and get it back for sale. It becomes an inventory utilization.

Okay. Gotcha. 63 - > So, Ryan, when you first got a look at Torrid's business and got to have some discussions with 64 - > John, what sort of jumped out to you about their requirements or their business 65 - > or their company? Yeah, a few things, Will.

First is the biggest thing that jumped out 66 - > was it was a fit. It was a fit for us. It wasn't something that we haven't done before. Apparel is 67 - > one of the most recent trends I would say in the return space is going from that brick-and-mortar 68 - > retail stores sending back product that needs to get sent back to vendors and it's shifted into 69 - > the eCommerce space with products coming back, credits to the consumers and then getting that 70 - > product back in the stock like John had mentioned.

So apparel being on the leading edge of most of 71 - > that omni channel clients fit really well with what we do with a lot of other folks. That said, 72 - > seeing it in John's site, you could tell when we walked through the facility with John, he had a 73 - > vision already for that area that was allocated to returns and he was thinking of how we could 74 - > take the labor that was in that area and the space and turn that into a revenue center for him. And 75 - > you heard it, John, when you were mentioning it a few minutes ago, you talked about how returns 76 - > are often shoved in the corner.

And John had a pretty difficult task in front of him in the sense 77 - > that he's worked in many different areas and many different industries and companies where he's been 78 - > able to outsource things like returns in the past, but at Torrid, had an organization and a culture 79 - > that was not used to outsourcing. So John was kind of on the leading front of his team trying to push 80 - > for a 3PL if you will or partner to come in and handle the returns aspect. So he had an uphill 81 - > climb, but through the vision of being able to take that space that they were allocating the 82 - > returns and the folks that were there doing the returns and converting them into a profit center 83 - > for fulfillment and meeting the demands of their clients was a huge win for him and it allowed us 84 - > to specialize in what we do best in the DRN which is focus on returns and allow John to do what they 85 - > do best which is focus on their customers.

Gotcha. And I don't know that a lot of people appreciate 86 - > sort of the visual differences of distribution operation that is sending new product out versus 87 - > one that is receiving returns in. And John, as I understand it, you were doing both activities 88 - > in the same building when you first arrived. Yeah, a lot of times you get into and I'll tell a 89 - > story here after this but you know you get into that situation that your building exceeds the 90 - > space and now I need that return space to support my outbound or my storage in the facility.

That 91 - > really wasn't the situation with us. It was more of a you know we are at a cost premium. Because 92 - > again over time that's you know I'll say it if you cut it out you cut it out, but you know in 93 - > distribution that's where you go to retire you go to the return center the in-house return center 94 - > and you know it's the shady acres return center and you retire over there. From that standpoint 95 - > ours was really more of a play for cost and more efficiency in the building.

And there's two things 96 - > that happened you know Ryan's absolutely right. It was an uphill battle for me. I had to go to the 97 - > C-suite and explain what we're doing and I'm with the company I think eight months at that time, so 98 - > I really had to put my best salesman hat on and and go tell the CFO and COO and everybody hey we 99 - > want to do this and they've never done it before and they never really been in that 3PL world. So, 100 - > I think from that standpoint, Ryan and and myself were kind of holding hands through this whole 101 - > thing.

The second thing is, when we went out to bid this with DHL, we were at probably a low-end 102 - > number of units a year. When we began to do business with them, at the same time, our business 103 - > decided to begin to transform its store base. And so we we began to close stores is what happened. 104 - > Underperforming stores or stores that were coming up on lease.

DHL was with us through that whole 105 - > thing. I think we, I don't know the exact number, but I think we said, hey, this account's going 106 - > to be a million units a year. Well, last year was about 1.6 million units.

And all that was due 107 - > to us closing stores and send that back to DHL for them to process that. And I got to say during that 108 - > time that they always stayed within the SLA. So I was able to take additional units , they were able 109 - > to process it and I was able to get that back into this facility here in West Jeff and put it back 110 - > in stock to sell it again. And that is a huge win for us.

It's not only from a costing 111 - > point of view, but from my our standpoint, we could have never flexed up to the amount of 112 - > people that DHL was able to flex up to and take care of that business. You don't expect to do 113 - > that. We didn't expect to do that, but it was one of those things that, they really stood by us 114 - > on that and got us through that whole situation, to the point where I don't think anything ever 115 - > aged over 14 days, which is pretty incredible because if we were to do that here with our own 116 - > in-house team, you could probably double that number and aging inventory sitting in somewhere 117 - > in the building.

That's just true testament to what they're all about. And it's always nice to 118 - > go back to the C-suite a year later and say, hey, we saved X number of dollars by doing this. Oh, 119 - > and B we're able to take the working capital and put it back into the operation so it could be 120 - > resold again. That's just a huge huge win for me because again they begin to trust you a little 121 - > bit more if you bring the next thing to the table is what it is.

Yeah. So within those 14 days what 122 - > activities take place, Ryan and then forecasting is tough and in a best-case scenario right I think 123 - > it's harder on the return side. How do you absorb unexpected volume and flex up to do that and and 124 - > still hit some of the performance criteria that John was looking for? Sure.

Yeah, it's a testament 125 - > to two things. One is operational excellence and a team that's looking at the forecast, driving 126 - > their labor based on a forecast, but like you mentioned returns is really tough when it comes to 127 - > forecast. The best way you can forecast returns is essentially saying what is the amount of volume 128 - > that we're selling over a period of time and our returns is typically X% of that volume and that's 129 - > what you think your returns volume is going to be.

And to John's point when you start having 130 - > things like store closures, throws a little bit of volatility into that forecast. The benefit 131 - > that we have within the DRN is we have not only a national network of buildings all over the 132 - > country, but our buildings are also multi-client facilities. So within one four wall and where we 133 - > process for John is a facility we call Rockville. It's in Indianapolis.

We have upwards of 20 to 134 - > 30 different clients in that facility all of whom have different peaks and valleys throughout 135 - > the season, throughout the year. Wee have some clients that have very high returns around the 136 - > Christmas time and then it drops off through the spring and then in the summer it gets really heavy 137 - > again. We were able to take that different staff that we have across that building who are very 138 - > familiar with not only returns but our platform as well.

They're also familiar with apparel for other 139 - > brands and we're able to cross-train them through our system to be able to to move from one client 140 - > to another to handle those different peaks that we get so we can absorb it a little bit better 141 - > during the seasons. It's a huge benefit to be able to have that multiclient site that shares some of 142 - > those overall expenses and also allows us to share labor a little bit more fluidly than you otherwise 143 - > would.

Interesting. Makes sense. So, John, whether you're talking your experience at Torrid 144 - > or other retailers from a scaling perspective, what do you think are the key elements to enable 145 - > you to take on more volume or shrink down when demand starts to to eb? Well, again, I think 146 - > it's, you know, just kind of what Ryan just talked about.

It's one of those things that in a regular 147 - > distribution center, you have the availability to do that, but if you have huge outbound going 148 - > on, on a seasonal reason, it kind of puts all that operation on the back burner, plus you 149 - > end up pulling those people over to help out. I think that's the key point is and that's really 150 - > from the story, they were able to scale up and down and I really think the reasoning behind 151 - > that is because that's what they really do.

The question that you always got to ask is, it really 152 - > can't be another department inside your operation that you're supporting. And that's really how we 153 - > sold it with our folks. We got to give this to the professionals to have them do it. And because 154 - > of that, they were able to do it at a lower cost and they were able to turn our inventory a lot 155 - > faster for us.

That's probably the key element in that you got to be able to take and move their 156 - > own folks. But that's what they do. I mean I go in the building and they're doing returns. It's 157 - > their business.

That's where you want it to be. Yeah. And I'll add on to that if you don't mind, 158 - > is when I applied to work within the DRN 15 years ago. I had an interesting interview with a 159 - > gentleman who had been here at the time for 20 years.

And he was talking about all the focus 160 - > they put on returns. And at the time I had been working for a WMS provider based out of Atlanta. 161 - > And I said, you know, when we go to a site and we look at the overall functional flow of a facility, 162 - > we spend two weeks talking to every operator in that building and we design everything from how 163 - > you receive, how you ship, and everything that happens in between. I said, we spend five minutes 164 - > talking about returns.

So, how does this company focus or this division of a company focus only on 165 - > returns? The guy sat there for about 20 seconds and then went, well, because people like you only 166 - > spend five minutes talking about it. It's such out of sight, out of mind. Throw it in the corner.

167 - > It is what we do. As John mentioned, it is the thing we are known for. The other analogy I would 168 - > use that he later said was you don't go to Five Guys and order a salad. You order what they're 169 - > good at, which is hamburgers, right?

And so in a world like John's world where he's so focused on 170 - > fulfilling orders and focusing on the customers, you don't hear apparel brands go out there and say 171 - > our most important thing is satisfying a customer and making sure their returns are good. Like you 172 - > don't want the return coming back, right? So let that go to somebody who does it for a living, 173 - > somebody who focus on it and loves it. Will, you mentioned earlier the difference between 174 - > returns and forward.

Whenever you talk to anybody in the returns or who's looking for a solution 175 - > for returns, they'll always preface it like, "Oh, our inbound looks ugly." And our feedback will 176 - > always be, it looks beautiful to me because that's what we're used to. It's a pile of everything 177 - > you can imagine thrown together. That's what we expect.

That's what gets our excitement up is 178 - > seeing returns pallets coming into our building, whereas most companies don't want anyone seeing 179 - > that. It's what we love. Yeah. That's great.

John, you know, Torrid has a good reputation in the 180 - > market with its customers and their loyalty to you. And I know you talked about what I would just 181 - > describe as sort of a fluid returns process or an easy to return kind of approach that you guys have 182 - > clearly taken. I just wonder how you think about that when you have multiple channels to market 183 - > obviously multiple channels back. How does that set up and how do you think about making that as 184 - > sort of frictionless of a process as possible?

Yeah, I think the first part of it is that 185 - > we've kind of talked about is, you know, from our standpoint, you know, I get a return, I 186 - > want to go through the inspection of it. I want to go through what they do up there. I want it 187 - > refolded. I want it re-bagged and then I need to get back into the DC because I want to resell it.

188 - > Part of that piece of it is I'm taking a return that somebody returned and I'm really re-bagging 189 - > it, refurbishing it, and then I'm putting it back and I'm selling it to somebody else. That's the 190 - > first thing. It has to go back out as brand new. And I think that check mark has always been 191 - > taken care of by DRN.

The second piece of it is the speed of it, because I don't want to hold 192 - > inventory either in Rockville or in West Jeff. I want to get it back on the site. I want to 193 - > get it out of here as quickly as possible. I think those are probably the two biggest 194 - > components of that.

From the other standpoint is, we treat returns as a loyalty moment is what 195 - > it is. So, a customer returns something, we want them to have a seamless experience with 196 - > that. We want them to be able to return it, and we allow them, we have a system that they 197 - > can begin that process with. They can, take it to a Torrid store and return it there or they can 198 - > send it back to us.

Very soon we'll have other opportunities for them to take it somewhere else. 199 - > But for right now, we want them to be able to not get caught up in it and to receive their credit as 200 - > quickly as possible. And that's the other factor that we've seen in the last year, is that they're 201 - > able to do that. And we have customer service just like everybody else.

And you rarely ever see 202 - > someone calling up saying, "Hey, I didn't get my credit fast enough or I never got my credit." 203 - > is what it is. And you don't ever see, "Hey, I got damaged merchandise when I ordered something from 204 - > Torrid's website." I think the customer population accepts the fact that we give them that seamless 205 - > loyalty opportunity and I think that definitely is due to the fact the partnership that we have 206 - > with Rockville and DRN.

Great. Ryan, just thinking broadly about your many customers, when somebody 207 - > new comes in like John did a few years ago, what are kind of the first, second, and third 208 - > things that you're looking for to understand, so that you can set them up in a way that's going 209 - > to be successful? Yeah. The first is what is their primary need?

And it just depends on the client, 210 - > but in most cases, it's very similar to what John mentioned. It's we need to make sure our consumers 211 - > are taken care of, that the customers are getting their credits back. And then second, how quickly 212 - > can we get the product back in the stock? Outside of that, there's very key things like what is 213 - > the volume, what is the seasonality so that we can make sure we labor plan accordingly for that.

214 - > But then it's also the criteria that's involved in folding the shirt. I know a lot of people don't 215 - > like hearing this, but not everyone can fold a shirt. And certainly different brands require 216 - > different levels of folding. There are some brands out there that if you go purchase them online and 217 - > it gets returned and you get it at your house, you'll never be able to get it back into that 218 - > same form in which you received it.

And that's important because a brand like Torrid that John 219 - > mentioned, they've got so much loyalty tied up into the brand that consumers know what to expect. 220 - > There's an experience in receiving that product at your home. It's important that we understand what 221 - > that requirement is so that when our team is being trained to fold and inspect that garment to put 222 - > it back in the stock, that we're doing it in a way that if one of John's customers orders that 223 - > that item, they can't tell that it came from the DRN.

They would think that this is something 224 - > that was produced off the manufacturing line, put into distribution, and sent to them without 225 - > ever having to stop anywhere in between. So, understanding that requirement is key when you're 226 - > in something like the apparel space. But outside of that, it's other key things like you know how 227 - > important is it the packaging that we discussed, does the item need to go into a certain size bag 228 - > based on the size of the item.

I mentioned already the volume and the disposition. So what do we feel 229 - > in terms of how much product should go back in the stock and what are the requirements associated to 230 - > validating that an item goes back in the stock. And one thing I'll tell you that I've learned 231 - > over the years is that, in especially again going into apparel, always have to turn certain items 232 - > inside out because you want to make sure there's another there's no other items within that that 233 - > garment.

And the same thing goes with pockets. We've received things from credit cards to wedding 234 - > rings to tissues or masks or whatever you name it, we find it in pockets as we do our inspections. 235 - > If you put yourself in the seat of a consumer, it's important that you check all of those because 236 - > if a consumer receives a product, they think it's brand new and they reach in the the pocket and 237 - > they pull out John Ball's credit card. They're not going to be too happy to know that somebody else 238 - > has used it, but they might use that credit card.

Nevertheless, you just want to make sure that the 239 - > item, you give the experience to the consumer that item had never been returned before. Yeah. Well, 240 - > I would I would use John's credit card for sure and I will willingly admit that I am not a good 241 - > folder. So, I may be rare in that, but never been very good at that.

I'll second that. Okay. So, 242 - > last question for both of you. John, you can you can go first because you touched on this a little 243 - > earlier about going to the C-suite, but you know, stepping away from Torrid maybe it's the same 244 - > advice, but when you would approach a CFO, CEO, chief operating officer around the the subject of 245 - > returns and what the kind of keys are to driving a business success with a returns network or returns 246 - > operation.

What would some of your advice be? Yeah. So, it's a great question and actually I've 247 - > had to answer that question before, but you know, the way I look at it is don't view returns as 248 - > a back-end problem. View it as an inventory opportunity because investing in faster returns 249 - > and stock cycles directly improves the full price selling windows is what it comes down to.

So, you 250 - > know, it sometimes becomes the problem of the DC. I send it back, it's now your issue. But I think 251 - > you got to bring that back into the revenue stream and say, "No, it's something that, you know, we 252 - > are going to be able to get this inventory back and we're going to put it on the web and we're 253 - > going to sell it again." And that's really what we've seen over the last year.

So, we've seen, 254 - > we track it. I mean, just like everything else in our world, we, you know, here at Torrid, 255 - > we track that. So returns come back in. We see how many cycles that it may go back out and come 256 - > back in.

But we also look at the fact that yeah, it came in and it was sold within 3 days from the 257 - > time we put it back in stock. We see a very nice return from that. And that's the biggest thing. 258 - > You got to pitch it as an inventory opportunity and not really as a back-end problem.

Okay, 259 - > great. Yeah, Ryan, how about you? Yeah, very similar is you can't look at it as just a 260 - > cost. So in if you're looking at returns and you say I want to get down the path of outsourcing 261 - > returns to an expert, someone like DHL and the DRN who knows and loves returns, you can't just 262 - > look at the price tag on it and say man this is more than what we're charging today or what we're 263 - > paying our employees today to do returns in our in that area of the warehouse because there's 264 - > other opportunities within there that you might not be collecting on all the things that John 265 - > mentioned and the experience of the the users, the productivity that we're able to achieve.

And 266 - > then also the opportunity costs associated to it. If you're doing this in your own center, 267 - > how much space are you allocating to that? What could those employees be doing to grow to 268 - > drive new profits within your center as opposed to focusing on returns? Give it to the experts.

269 - > Give it to somebody who knows what they're doing, somebody who loves it, and somebody who will 270 - > treat it like their highest priority. Well, that's a great way to end us today. Great 271 - > conversation, really interesting stuff, and it's always fun to listen to two people 272 - > like you who clearly have a great working relationship and partnership. We'll look forward 273 - > to hearing a next DRN update hopefully soon, but between now and then, wish you guys both 274 - > luck.

Have a good summer and keep it up. Sounds good. Appreciate it. Thanks a lot for having 275 - > me on today, Will.

Good to see you, too, Ryan. 276 - > If you enjoyed today's episode, be sure to rate us and subscribe to us on Apple Podcasts, 277 - > Spotify, or wherever you get your podcasts. You can also listen to 278 - > our entire library of episodes on our website, dhl.com/ABNBpodcast.

279 - > See you next time.