The Special Solution to the Logistics Problem with Mike Newman of Returnity

Hello and welcome to this episode of Conscious Design. I'm your host, Ian Peterman, an author of the book Conscious Design. And with me today, I have Mike Newman. He's the CEO of Returnity, and he's really taken them from their startup to where they're at now, uh, in offering reusable packaging that Some really big names have started to pick up, which is exciting to see. So welcome, welcome to the episode.

Thank you so much for having me. Great to be here.

Yeah, so we all know packaging is a huge problem. There's— it's a big thing to address, uh, and you guys are, you guys are working to tackle that problem. I'd love you to just start out with kind of where you entered? Because you got brought on, you know, got founded, and then you got brought on to really kind of spin off and scale, scale this out. So can you share a little bit of kind of that journey from when you, when you got brought on to what you can see today?

Absolutely. You know, Returnity was originally part of a reusable shopping bag business, and they happened to have ThredUp as a client buying reusable shopping bags that we're giving away at events. And James Reinhardt, the founder and CEO, asked if they could make him a reusable shipping bag. So it was actually his impetus that sort of sent, sent us to the drawing board and said, I don't know, let's see if we can figure that out. And he liked what we came up with enough to be our first investor. That investor group ultimately decided to spin out the shipping delivery packaging concept into its own standalone business. That's when I was brought in in 2017. So in some respects, this is an 8 or 9-year-old idea already. It's been a standalone company for almost 5, explicitly targeting shipping delivery packaging. And like you said, it's a really profound problem in the US alone, enough packaging to pave a cardboard road from New York to LA and back 3 times a year. That's how much packaging we're using in the US. So it's an enormous amount of packaging, it's a lot of waste, and it's only growing as an issue. And so for us to be focused on it has been an exciting challenge and opportunity.

Your implementation, right? So you have the average, the average action somebody takes is they get a box and they go throw it away. And you guys are, are trying to— not trying to, you are working with some really good partners to make it so that there's a different action. You have this reusable packaging. Now, how you use it and how, how that works, can you explain the process of kind of what, as a, as the average user, what that experience is, but then also from the business standpoint? Kind of how do you— because this is a new system, right? Usually you don't— you only get packaging back if something's broken or there's a problem. So it's a different kind of mentality and system to work forward.

Yeah, I mean, I think I jokingly call Returnity the best cocktail party company I've ever been a part of, because when you tell people that you're working on packaging, they get really excited because they feel it. Like the average consumer, it's like right in your face. You're handling it all the time. It's very common for people to tell me how much they hate Like trying to cram it all into the recycling bin every week.

It was garbage day today. I saw the street lined with it.

Yeah, it's not hard to connect with consumers on this idea. And then the companies know it. I mean, they feel it, they experience that, they experience it themselves as consumers, and then they certainly hear it from their customer groups. So getting people to pay attention to this idea is not generally the challenge. But executing it at scale and making it work from an operational and economic standpoint is tough because our whole infrastructure, our whole supply chains are built around cardboard boxes and poly mailer bags. And every person in the, you know, every stakeholder group, as I put it, consumers, branding, logistics providers, you know, the shippers like postal system or UPS or FedEx, You know, the customer, the warehouse employees, the machinery that packs things into boxes and seals them and labels them, it's all built around those existing materials. And so to make the change and to do it at scale, it's a lot of change. It feels like it should be easy because cardboard is, as we say, is dumb and it's easy. And so people just, you know, like, cardboard's so dumb and easy, but that's kind of what makes cardboard really great is that it's so dumb and easy, right? So like everything is built around dumb and easy, and we have to be able to replace dumb and easy with its own type of dumb and easy. And that, the nuance in that is where the challenges come. But people are paying attention. They want it to change. There is a need for change. That is a good head start. How we actually execute that and make it viable at scale, is, you know, is where the, the real work begins.

Yeah, and because there are so many people, like you said, there's an entire economy built around the cardboard box, right? And everything, uh, packaging designers, if you talk to them, it's, oh, well, of course we're using a cardboard box of some kind, paperboard, whatever it is. Are you seeing Any resistance on the branding? Like, is there resistance from, from certain groups in, in like a constructive way, or is it just, we've never tried this before and have no idea what to do with something like this?

I think inevitably part of the answer in part is yes, there is some pushback. And I think the pushback comes from maybe not always appreciating that, um, at the end of the day, all these, all these systems are built around individuals and their individual job responsibilities. their bonus structures, their budgeting system. And the bigger the organization— first of all, if this is going to have impact for us as a company, for us to grow and be successful, but then for the environment, for our built environment, you know, for all those things, if we're going to actually scale, you have to do this for the largest companies. Well, the largest companies have a lot of layers of responsibility and people who own specific components And there's very practical and reasonable reasons that this can be hard to execute. If I'm a warehouse manager and all of a sudden I have to have an inventory location for cardboard and an inventory location for reusables, and I've just doubled the sort of inventory process I have to have, like, that's a real issue. You know, that's not something that you can just brush aside. So I think that there are real challenges. challenges that have to be taken head on. But I also think that in general, whether it's public pressure, whether it's regulatory, or whether it's C-suite directives, which increasingly companies have just said by 2025, no more single use that isn't recyclable or compostable. So we're going to prioritize reusables, compostables, and fully recyclables. So they know they have to change. The company has said on record, we're going to change. So they're diving in to do the work, but it's work and it has to be done Right.

Is there— you don't have to say a name, but is there a company or a deployment of this that's gone the best, that would be like the ideal scenario where it's gone and it's worked as best as possible in deploying this reusable packaging?

There's a few. Yeah, we have some amazing clients and I have no problem calling them out. I love doing it. I think it depends on the type of packaging. On the— there's all these different sort of pockets that we figured out where reusables are sort of the best applied. Sometimes it's more internal. So for example, PayPal Happy Returns, which runs this national network of in-person return bars, they're called. So if I buy something online and I want a product and do a product return in person, I can go to these return bars. We actually make the packaging that runs that whole system. So behind the counter, the box that your shirt or your shoes from Rothy's or wherever you— whatever product you bought that you want to return, it goes into one of our boxes. They're shipped from that retail store back to the warehouse, unpacked there, and then they send all those empty boxes in aggregate back to the retail store. So they created this closed loop for this, for the reusables. It's in thousands, soon to be tens of thousands of drop locations around the country, and it just works. So that has become this really hyper-efficient that scaled from, I think the first order was 5,000 units, and now they are executing tens of thousands of shipments a week in our packaging and growing fast. So internal applications like that, or with New Balance, for example, they have a sponsored sports team group, and that sponsored sports team group sends the teams the product samples of the jerseys and the hats and all the gear that New Balance is making for the team, they'll send them samples to review before they make the full order for the team. They switched to using reusables for that because it's perfect because they send out the samples and the samples get sent back.

Right.

So those sorts of applications, or on the more on the consumer side, like with Walmart, where we did a partnership with their in-home team, which is grocery delivery, it went from, you know, the first pilot was 300 bags just to figure out What is working? What isn't? Where are the sensitivities in this? That kind of focused testing and then scaling it out into multiple geographies and with a refined product and refined system—that's when it's really started to work best for us. And so I think those clients that take that sort of small-scale learning, apply, and grow approach is is what's worked best. And and when it's the big corporations who need tens of thousands, hundreds of thousands, millions of bags a year, that's when you start to see impact.

Right. Yeah, it's always when you can do it at scale, that's when you see those huge, huge impacts, which is what we need, right? It's not— I mean, mom-and-pop is good, definitely, definitely. They can use it, great. But if you can get Walmart to use reusable packaging, that's, that's a lot of boxes you're, you're saving. With, with the consumer side, is it— because you mentioned like the grocery delivery and things like that— is there— are there companies looking at this from a, hey, we're going to actually ship out product and have the consumer return the bag? Is that kind of the direction, or is it more of a controlled scenario where the company has a little bit more ownership of it?

Well, the way, the way we've structured ourselves internally to think about this challenge and then how we engage with our corporate partners to help them best understand when, why, and where reusables might be a good fit is what we ended up calling our 3P framework, which what that just means is process, participation, package. All those things have to work together. So process is how are you actually getting it back? It has to be low cost, it has to be efficient, and if it's too expensive, then someone's subsidizing it, and subsidies in the sustainability space is a very, very difficult way to try and grow. You need to try and find unit economic competitiveness. So in a direct-to-consumer e-commerce application, a lot of companies, a lot of consumers really wish that companies were shipping in reusables now, and I could get my online orders in reusables. The problem is that, as you said, Today, most of the time you're not sending anything back to the company. So when you ask the consumer, hey, we're so glad you like your order and you're keeping your order, but remember that reusable bag we sent it in? Could you turn around and send that thing back to me? The cost of having it shipped back empty, even if it folds up small, and we've done that, and you can do things to optimize, but you're paying— maybe you're paying USPS $2 or $3 to get an empty shipping bag back that's replacing a 20-cent poly bags. So that's a really profound new expense. And then there's the participation part, which is you have to actually get them back. You can't—

Right. You don't want to lose a $3 bag every time.

That's right. And, you know, the reality is that consumers are really lining up to this new way of thinking about product consumption and packaging and all these things. There's a lot of really great momentum and a lot of desire. And in many instances in that opt-in sort of will you please approach, you can get 70, 75% of them back, which feels like a big number.

That does. That's higher than I was thinking.

And it's not, you know, that's a good starting point, but the reality is it needs to be 95%. Because if you only get it back 75% of the time, that means every— you send out 100, you only get 75 back. You send out the 75, you're getting about 50 back. Like, On average, that ends up being only about 4 uses for the reusable package before it's not returned, and 4 is not going to help the planet. These packages are more environmentally intensive to manufacture. They, they have to be used a lot.

Right.

So you have to have a cheap way of getting it back, you have to actually get it back at a very high rate, and then the package has to work. It has to be the right size and the content protections and the branding and all those things. So All those puzzle pieces have to really fit together. And generally what that means is, as much as consumers and companies would like it to be someone coming to my site and ordering a shirt or a pair of pants every now and again, Right. The better fits are those parts of their supply chain where they have more control and more frequency and the ability to really adjust the economics to align all those things. So that might be grocery delivery where they're coming to your home every week, or it might be rental, like with Rent the Runway or clients we have like that where you're sending it back to them at the end of the rental period anyways, or it might be that internal logistics, like with PayPal or with New Balance. There are some really big areas of the supply chain that already work for reusables today, and there's some really big ones that don't. And so we think there's progress and there's momentum to be expanding that, the size of the category, but today we're trying to be really focused with companies so they don't get off on the wrong foot. And they don't lose faith in reusables, and they understand why reuse can be right and why it can't, and how we can change that reality today.

Right. I mean, it's, it's the smart approach, right? Say, here's, here's the solution, but, but you're not a solution for all, all scenarios. It won't necessarily make sense, which is, you know, good, good to make sure, especially if you're trying to get companies to onboard and like it, you got to be able to control, control the experience and make sure it's actually used properly rather than just hope, hope it works, hope it works right somehow.

Yeah, I think that's right. And I don't think that's exclusive. I think that our criticism of the circular economy or reuse, reusables, or however people want to— whatever terminology people use today— is too much of this reuse fairy tale. kind of approach. And it's easy to launch a reuse program. It's hard to sustain and grow because unit economics, they matter. They do actually matter.

Right.

And just putting it out there and hoping is unfortunately not enough. And so I think that the enthusiasm that so many have for this new, the modern milkman or whatever people wanna call it, there's a lot of excitement But that excitement is sometimes blinding the reality of how this is a unique challenge. It's a unique service model. It has to be built on a strong foundation if it's going to sustain and grow. And that's not just, hey, let's send it out in reusables. That's not good enough. The packaging actually ends up being the least sensitive part of it. And oftentimes companies are designing these super fancy expensive, feature-laden reusable packages, and they're putting them out in these applications where they hardly ever get them back. So they might be designed to last 100 uses, but the return rate means they're only being used 4. So it's, you know, people are just still learning some hard lessons, but important lessons.

Right. And are you guys, are you guys looking to kind of expand into that? Are you looking at different avenues of of what different kinds of packaging could be, or are you guys just laser-focused and, and this is, this is the package, this is what you guys do, and this is the zone you're, you're really working on?

I think we're doing 2 things at once. Um, the first is we've learned models that, that work for some really exciting major retailers, and now as we're growing as a team, we're finally taking what we've learned to the larger marketplace and those companies that have the same kind of customer relationships so that they can implement it in the same way. So whereas over the last few years we've been so— we've been a small team and so busy just executing with who we had, we haven't had a chance to go out and tell the rest of the world, hey, we've figured this thing out that works, but we're on track to have our packaging displace 2 million single-use bags and boxes a month by later this summer. So it's really scaling out in a way that's exciting, and we know it'll work for a whole bunch of other retailers that have the same kind of supply chain setup as the ones we're already working with. So that's one part of it. The other part— so part of it's just blocking and tackling, just like, let's go out and do what we've learned. The other part of it is building on that innovation that got us here, for what's going to come next. Because what you're seeing is the rest of the world, as we've talked about, is already saying that alone is not going to be enough. Regulations are starting to force the hands of companies and consumers. In New Jersey, for example, there's now a ban on using single-use bags for grocery delivery. You can't use them.

I think California is working on also doing a statewide No plastic grocery bags at all, I think. So not— yeah, just gone completely, which isn't bad, but there needs to be a solution to backfill the need.

That's right. So they are sort of pushing everybody into a new reality that maybe we're not ready for yet. That creates challenges. It also creates opportunities. And we think we've learned a lot about how to meet that challenge for Everybody, but we've got to go and do it now. So we're building out our own capabilities, integrating what we've learned to try and be that partner for what becomes the next step. And all that increased awareness and regulation, all those things, it's going to open up more of the supply chain as retailers get used to reusables, as consumers get used to this new idea, as the shipping companies start to be more partners rather than roadblocks, which is, to be frank, what they have primarily been to date with reuse. Um, yeah, yeah, open up more.

Hey, it's Ian here. So glad you're enjoying this episode of Conscious Design. If you want the full scoop on conscious design, what it is, how we do it, how you can do it, then check out our book. We wrote it so creative entrepreneurs like you can code social and environmental responsibility right into your brand's DNA. You can download the first chapter for free. Link is in the description. Enjoy the rest of the episode. Don't forget to like, subscribe, and share. Yeah, I was kind of curious how, how shipping companies, especially if you want to have stuff come back, you know, you mentioned, you know, the old milkman prior, you know, your milk in a glass thing, took away the empty one. Uh, that worked because the same guy showed up and swapped out and then went away, and then it got cleaned and used again. Is that— and you said there's some resistance there— is that kind of one of those aspects of the consumer packaging version working that's just kind of slow? Is that kind of what you're seeing, or—

Well, I think it can be profound or it can be mundane, and in the end, the answer is all the above. The profound is if I'm UPS, Or FedEx, and my logistics hubs are built to have conveyor belts where cardboard has a certain coefficient of friction. And so I know that when I have ramps, they don't go— they don't get stuck and they don't go flying down the ramp because it's cardboard and it's got this amount of friction. And then you introduce a new material type and reusables, and are they going to— so those things, that's important, right? Like, that is something that has to be solved and addressed. You have to make sure it can align to embedded technology. The mundane is more things like delivery drivers, when they organize their trucks, write on packaging in permanent marker all the time. And consumers almost never realize that because you don't pay attention to the cardboard box you get from Amazon or whatever. It's just the box and you tear it open and you throw it away.

So you really don't care.

And you don't really care. But if it's a reusable and now it's got permanent ink on it, for someone else's street address, you care because now you can't use that thing. So we have to design around and away and disable the ability of delivery drivers to write in permanent ink on packaging so that it can be used for future cycles. So it's—

You just make it a whiteboard. They can mark it up all they want. You just wipe off.

Well, and right. And of course, these are relatively lower-paid people. They have high turnover. They that you can train them to stop writing, but what's the— are they really going to be held accountable to that? These are the little details where these things can live or die. So I think that you can run towards it or you can run away from it. I think the carriers, everybody in the supply chain understands that evolution needs to happen, is happening, will happen. How quickly some come along and don't, is to be seen. But I think in general, that middle mile that UPS, FedEx, USPS, et cetera, occupy has been tough and they will have to be pushed probably faster and harder. But they also have reasonable reasons that it's been tough for them. So we just try and be— we are sympathetic to the challenges. We're also impatient. So we aren't going to sort of sit around and wait, but we have learned to understand where the stickiness is happening and why and how to help best everybody move through that towards a more efficient way of utilizing reusables in the future. But at the end of the day, right, it's not the same person coming to your door every day. And to just call it the milkman model is not— that, that's just cute branding. It doesn't actually address the core issue.

I mean, unless Amazon wants to pay for someone to walk the same street every day and just do it, I don't see anybody That's a whole different model. The milkman model is not even something we have in modern day. I don't— I can't think of anything actually that's even close.

That's right. And if I'm ordering groceries from DoorDash, it's not just that the person who's bringing my order that day may never come to my home again, they may never drive for DoorDash again, or never visit a Walmart when they drive for DoorDash again. So this It's a very different infrastructure world that we're occupying, and you have to be thinking how to work with it.

Right. Well, and like you said, there's so many factors and so many— and people's habits, right? There's habits inside of industry that you can train, but it's hard to remove an entire habit from an entire industry. All in a nice, nice, easy, like, well, this day we had it and this day we didn't. It's not just not that simple.

But then our response is not to just pack up our toys and go home. It's to lean in on that, that sensitivity and to say, rather than ignore that reality and struggle, what we want to do is to be If it's a trillion-dollar packaging market, 100 billion parcel deliveries a year, you know, whatever huge number you want to throw out there, they're all, you know, they're all big.

They're all big.

There's success to be had by understanding these dynamics, understanding where success is today. And success today is in segments of our supply chain, segments of how as consumers and companies we're consuming and using packaging that are actually very big and have really big impact. So just because buying stuff from Amazon is the most visible part of e-commerce and maybe the hardest nut to crack from a reuse space today, that doesn't mean that reuse doesn't have a place and a really profound impact when it's done correctly, and it is having a profound impact. So I think eventually those more visible consumer segments will become smart plays for reusable. Today they're not there, but that doesn't— that's not a disaster. It's actually, it's exciting to see all the applications that are working already today and how much impact those are starting to have.

Yeah, well, and you don't always get to start in the highly visible sector. I feel like there's a lot of— I mean, it's very visible because it's such a huge thing for people, right? It's Like you said, it's a very great conversation starter. Everyone's very invested, everyone has an opinion, and we all interact with a package almost every day. So it's so— it's so there relative to other things. But at the same time, like you said, that's still just like a tip of the iceberg part. There's all of this other shipping happening that you can have a reusable option for that people aren't even you don't even see inside company. Like nobody, nobody except for the employees of that company ever, ever use or see or think about all that packaging, which, which is kind of hard to grasp for, for the average consumer. But, but it's a good— I think it's a good place to start and prove out the technology where you have more control. And then And then we'll— you can figure out a way to release it into the public and, and get a more Amazon-friendly version that can work for that, for that kind of packaging.

Yeah, I think that's, I think that's right. And it's not about— for us, it's not shaming, it's not blaming. I— it's, it's, it's a system that we—

Never helps anyone.

Yeah, we've all been a part of creating our world and our— and how we— and there's a lot to like about it and to be excited about how we've evolved in delivering products and services as a society. So there's downsides to it. They're pretty clear in a lot of settings now.

Yeah.

Work has to be done to address it. I think that we are all gonna have to co-create that new future. I think there is a lot of momentum there. We want to lean in on that momentum, but the idea that just put it in reusables is— that's too simplistic. It's not enough to just put it in reusables. It has to be a more profound sort of look into how we've evolved as a society to buy and receive goods and products and what kind of responsibility we take for it. All those things have to be a part of this, but increasingly that's the dialogue, and increasingly consumers are saying they're ready to be part of that dialogue. So I think The change is happening, whether, like you said, whether consumers necessarily see it today or not, it is already happening. The change, I think, is accelerating. And I think that over the coming 5 years, and at some point in the next 5 years, we're going to look back and say, wait, when did we all start? Because it'll be more subtle. It's not going to be—

Well, it's like grocery delivery now. Like, think about how prevalent that is now compared to 5 years ago. We just woke up one day, we're like, well, I guess everything's delivered. Look at that.

So, right, we're— it's, you know, we're all promised flying cars, uh, and, and then all of a sudden you say, wait, there are flying cars? When did we get— like, it just, it's just sort of happening in real time. Uh, I think that we'll see a lot of that as it relates to circularity in general, packaging specifically. It's happening in subtle ways, more than smack you across the face ways. But that's better. I think that that's a more grounded, realistic approach to this kind of change. And I think that the energy and the commitment is there from retailers, certainly, certainly from elected officials, advocates, everybody. They all want to see that future. I think the work— there's a lot of— it's not necessarily getting as many headlines, but the work to really create that future is happening behind the scenes.

Yeah, well, and it's, it's good to see companies like yours more and more are looking at when creating a product, they're not just going, oh, here's a reusable bag and throw it out there and, and see what happens. You're looking at the whole impact and people are starting to realize that we have these structures, infrastructures in place, and you can go green, you can do good things, but You need to work within the infrastructure to change it, not just throw a wrench in it and be like, well, I stopped it. That's great. Now what? It doesn't roll over well. And that harsh shift is just brutal to go through if you try to do that to anyone.

Yeah, I think that's absolutely right. And the subtlety of influence from all these players within the supply chain is something that just has to be reckoned with. The flip side of it is that there's a lot of counterpressures that are making that easier to socialize. We were just talking to a client who ships mattresses in one of the mattresses in a bag.

Yeah.

Or box delivery companies. They can't get cardboard for— if they wanted to place a new order because they're expanding, they literally can't even get boxes any faster than 16 weeks today. So if they had fluctuation in there and they started to get more orders than they had anticipated, which is of course what they're trying to achieve.

Usually hope.

They can't even get shipping boxes for over 4 months. The market just doesn't have more capacity. So The linear economy, whatever you want to call it, single use, all the supply chain things that COVID has helped to sort of bring to light.

Yeah.

It's not like everything's going great otherwise. It's just all of a sudden people are worried about climate. It's that all these things are problematic today. So there's space for this today in ways that there weren't even a few years ago. Because the status quo isn't working, even just, even if you ignore all the public pressure part of it, the status quo isn't really working for companies anymore either. So they, people know that they need to evolve for a whole host of reasons.

Yeah, I think pre-COVID, you couldn't have really a supply chain conversation with the average person, but now it's so here. It's not a weird conversation you just have with engineers and supply chain experts. It's, it's now something that people are really aware of. And yeah, there's even— our supply chain is sort of getting back to normal, but it's not, it's not really, which is impacting like the box. You can't get cardboard sometimes. So. Not, not good.

Exactly.

Yeah, well, I really appreciate you taking time to do this and chat about what you guys are doing, and it's amazing. I— it's, it's a great idea, and I'm glad to see so many big companies are, are getting on board with it and are, are willing to invest and, and have this as part of their, part of their system, even if it's internal. It's still saving tons of packaging and cost, I would imagine, over a lifetime. It's going to be better for everyone. So for anyone that's wanting to work with you guys, get a hold of you, where's the best place to find you and do that?

We'd love people to get in touch. Yeah, we're just— our website is great. returnity.co is the best spot to find us. And, and we, we have gotten really good at helping clients along the journey, starting small and expanding. Whether, like you said, whether it's Estée Lauder and Walmart or early stage, or even pre-launch, we help find the right approach for you as you're thinking about packaging. And, and we love having— we get really excited. This is, this is, we wake up very excited about what we're working on. And we always love hearing from, from others who, who are interested in that, that journey as well.

Well, it is exciting. So I hope you guys stay excited for a long time about this. Uh, and yeah, there'll be links in the description for everyone listening and watching to go there. And yeah, I really appreciate it. Thanks for being on here, Mike.

Thanks for having me. Good to talk.