Happy Returns Acquisitions Makes UPS ‘Most Consumer-Friendly Logistics Provider’
UPS has acquired Happy Returns from PayPal in a deal that brings America’s biggest package carrier deeper into the reverse logistics ecosystem ahead of the holiday season.
The terms of the transaction were not disclosed. CEO Carol Tomé said in an earnings call Thursday that the Happy Returns deal and last month’s MNX Global Logistics acquisition were worth a combined $1.3 billion.
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With a network of nearly 5,200 The UPS Store locations, Happy Returns’ box-free, label-free returns will soon be available at more than 12,000 sites nationwide. A Happy Returns blog post said the deal would enable the reverse logistics company to scale its volume and reach outside the U.S., and help it gather expertise in return drop-off services and automation.
The move also is a big score for UPS in taking business away from rival FedEx. More than 2,000 FedEx Office locations offered Happy Returns’ in-person returns service, but that relationship is coming to an end.
“We expect that relationship to wind down quickly, and we look forward to bringing on the best-in-class capabilities of The UPS Store as quickly as possible,” a UPS spokesperson confirmed to Sourcing Journal.
The acquisition comes as the delivery company aims to regain customers it lost during its third quarter as it bore the brunt of a potential Teamsters strike, which resulted in a new contract for 340,000 union workers.
Reflecting continued weak demand, UPS is cutting its full-year guidance for the third time this year. The courier now expects consolidated revenue to be between $91.3 billion and $92.3 billion, or down 8 percent to 9 percent from last year’s $100.3 billion. It also expects consolidated adjusted operating margin of between 10.8 percent and 11.3 percent, down from 13 percent last year.
According to Tomé, 600,000 of the 1.5 million packages that were diverted from UPS have returned to its network. She said the rate of customers coming back is “accelerating.”
“Customers want to come back into our network before peak [season] because of our superior service that we’ve exhibited over the past five years,” said Tomé. “That’s always fun when you’re picking up volume from your competitors.”
UPS generated revenues of $21.1 billion in the third quarter, a 12.8 percent decrease from the prior-year quarter. Consolidated operating profit was $1.3 billion, down 56.9 percent compared to the third quarter of 2022.
Revenue dipped 11.1 percent in the domestic segment, driven by a 11.5 percent decrease in average daily volume, which was partially offset by a 2 percent increase in revenue per piece. Internationally, revenue also dipped 11.1 percent, primarily driven by a 6.6 percent decline in average daily volume and continued softness on the Asia and Europe trade lanes.
Tomé said in the call that the Happy Returns deal will complement the company’s current returns business, which has grown 25 percent since 2020.
“We know we can offer a better experience for our retailers because [returns are] expensive,” Tomé said, adding that the consolidated returns software will help cut customers’ handling costs and improve UPS’s delivery density.
Sam Atkinson, CEO and co-founder of Swap, a platform that enables e-commerce operations to manage shipping, tracking, insurance, and returns, framed the deal as a real estate move.
“They’ve now tripled their logistics network, expanding from their 5,000 brick-and-mortar stores paired with the 10,000 Happy Returns in the U.S. alone,” Atkinson told Sourcing Journal. “It turns UPS into the most consumer-friendly logistics provider overnight with a dominant foothold on SMB and e-commerce business.”
Using Happy Returns, consumers can access a returns portal online, select a returns location, make an in-person, box-free return and have their item shipped, sorted and returned to one of 800 partner merchants.
Happy Returns CEO and co-founder David Sobie will continue to lead the business for UPS after the deal closes. This should happen in the 2023 fourth quarter, subject to customary conditions and regulatory approvals.
UPS followed in the footsteps of rivals FedEx and the U.S. Postal Service in announcing its holiday shipping deadlines for 2023.
Unlike FedEx and the USPS, UPS wants to ensure deliveries by Dec. 23 because it won’t pick up or deliver on Christmas Eve or Christmas Day.
The company recommends sending packages by Dec. 19 using Ground Shipping, or Dec. 22 at the latest via its UPS Next Day Air service with Saturday delivery. For shipments from the U.S. to Canada or Mexico, shippers must send packages by Dec. 19.
