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

In this episode, join John Ball, VP of Supply Chain at Torrid, and Ryan Dupuis, Director of Onboarding and Client Experience at DHL Supply Chain, as they discuss Torrid’s returns transformation, customer loyalty and the partnership that enabled seamless omnichannel growth. Discover how they navigate change and what’s next for returns in modern retail. 

Transcript

0:09

Welcome to All Business. No Boundaries., a collection of supply chain stories by DHL Supply  Chain, the North American leader in contract logistics. I'm your host, Will Heywood. This is  a place for in-depth discussions on the difference DHL makes on your supply chain challenges.  

Today's episode is Scaling Loyalty: 0:25

How Torrid and DHL Redefine Returns in Modern Retail. Let's  dive in. Today's episode is all about partnership and scale in modern retail. Torrid operates at the  intersection of digital growth, store presence, and fierce customer loyalty. Product returns  play a critical role in that experience. We'll explore how Torrid's business model has evolved,  why returns became a strategic focus, and how collaboration powered a major transition  behind the scenes. So, I'd like to welcome my guests today. We have John and Ryan. And  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 with you. Yeah. So, my name is John Ball. I'm with Torrid. I've been here approximately three years  and I'm Vice President of Supply Chain. Terrific. Ryan, over to you. Yeah, I'm Ryan Dupuis. I've  been with DHL for about 18 months now. We were acquired in January of last year. I've been part  of the DRN organization now for 15 years and my role is the Director of Product Solutions  and Onboarding. Okay. Terrific. Well, thank you both for being here. I've been looking forward to  this discussion. We had an episode covering the DRN probably about a year ago. So, it's nice to  pick up and have a live customer along with us this time. Maybe before we get further, Ryan,  DRN stands for? Yeah, great question. DRN is the DHL Returns Network. Okay, John, some of  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 size and scale, you know how you guys define  yourselves in the market. Yeah, great question, Will. 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 have storefronts across the United States. You  know, we really focus on destination for fit, style, and community is our our main thing. We're  about a billion dollar a year company. We have 450 stores and then we have our our web business  which is coast to coast and actually worldwide. So we have do have stores up in Canada along  with the United States and you know, it's been a great experience for me to be here over the last  three years and, by the way, I'm very pleased to be on your podcast today, too. Oh, we're happy  to have you on it. And you're based out, you were telling me, you're based out of Columbus,  Ohio. I know you've been in the industry for a bit. So pre-Torrid, what were you doing? Yeah. So,  you know, I've had the great pleasure and I don't want to date myself here because I know Ryan's on  the call. He's one of the young bucks coming up. I've been a distribution logistics leader for  many years. I've worked with global brands such as American Airlines, Frito-Lay, PepsiCo, Ride 8,  Big Lots, and Torrid. You know, really my specialty is high volume distribution,  reverse distribution and pharmacy operations. And I probably led you know a lot of different  teams but you know my main focus is always peak performance and optimizing supply chains to keep  the business moving. Okay. So you mentioned returns in there and that's where we're going  to focus today. How does Torrid approach product returns as a business requirement overall? What's  been your experience over your three years there John? And then how did the two organizations come  together in the first place? Yeah. So, you know, I've been very fortunate to been associated with a  lot of in-house returns and out-of-house returns. We actually, returns is always one of those  back in the house situations and people really don't look at it that much. It's just there. We  utilize it for our customer loyalty. Our goal is to if a customer orders something and tries it on  and doesn't fit or they don't like it, we allow them to return that and they can either return it  at a store or they can return it directly to us. So when it does get returned back to us,  of course, the customer wants to get the refund as quickly as possible. That's one of the things we  try to do is try to get a return back to the DC, get it refurbished and all that process and then  be able to give that customer credit back onto their account. At the same time, we are always  looking to utilize our returns back into the mix of our operation. So we want to look at getting  that item back onto the web and up for sale again. When I got here three years ago, we had an  in-house returns processing system. I think it did well on the low time, but scalability was very,  very difficult. And one of the things we did find is that when business, start hitting different  peaks during the year, returns would get pushed off to the side and then you begin to get backlog,  which would associate issues with getting customer credit and things like that. So we began to go out  and look. We found DHL as a partner. We talked and then we came to you know, they could suffice what  we needed to do, which is A process the returns and get the credit back to the customer as quickly  as possible and then actually get the item back to us so we could put it back on the web and resell  it. So, it was one of those partnerships that I think when we started discussing this stuff,  it was going to be very quick. It actually turned into a little longer than we anticipated, but  again, they satisfied a niche. At the same time, by doing that we were able to have a  huge cost savings in the first year and actually we're seeing the same cost savings in the second  year. So again, it's cost mitigation. At the same time, we're able to turn our inventory  from the returns back into the operation to get it back on the web and get it back for sale. It  becomes an inventory utilization. Okay. Gotcha. So, Ryan, when you first got a look at Torrid's  business and got to have some discussions with John, what sort of jumped out to you about  their requirements or their business or their company? Yeah, a few things,  Will. First is the biggest thing that jumped out was it was a fit. It was a fit for us. It wasn't  something that we haven't done before. Apparel is one of the most recent trends I would say in the  return space is going from that brick-and-mortar retail stores sending back product that needs to  get sent back to vendors and it's shifted into the eCommerce space with products coming back,  credits to the consumers and then getting that product back in the stock like John had mentioned.  So apparel being on the leading edge of most of that omni channel clients fit really well with  what we do with a lot of other folks. That said, seeing it in John's site, you could tell when we  walked through the facility with John, he had a vision already for that area that was allocated  to returns and he was thinking of how we could take the labor that was in that area and the space  and turn that into a revenue center for him. And you heard it, John, when you were mentioning it  a few minutes ago, you talked about how returns are often shoved in the corner. And John had a  pretty difficult task in front of him in the sense that he's worked in many different areas and many  different industries and companies where he's been able to outsource things like returns in the past,  but at Torrid, had an organization and a culture that was not used to outsourcing. So John was kind  of on the leading front of his team trying to push for a 3PL if you will or partner to come in and  handle the returns aspect. So he had an uphill climb, but through the vision of being able to  take that space that they were allocating the returns and the folks that were there doing the  returns and converting them into a profit center for fulfillment and meeting the demands of their  clients was a huge win for him and it allowed us to specialize in what we do best in the DRN which  is focus on returns and allow John to do what they do best which is focus on their customers. Gotcha.  And I don't know that a lot of people appreciate sort of the visual differences of distribution  operation that is sending new product out versus one that is receiving returns in. And John,  as I understand it, you were doing both activities in the same building when you first arrived. Yeah,  a lot of times you get into and I'll tell a story here after this but you know you get  into that situation that your building exceeds the space and now I need that return space to support  my outbound or my storage in the facility. That really wasn't the situation with us. It was more  of a you know we are at a cost premium. Because again over time that's you know I'll say it if  you cut it out you cut it out, but you know in distribution that's where you go to retire you go  to the return center the in-house return center and you know it's the shady acres return center  and you retire over there. From that standpoint ours was really more of a play for cost and more  efficiency in the building. And there's two things that happened you know Ryan's absolutely right. It  was an uphill battle for me. I had to go to the C-suite and explain what we're doing and I'm with  the company I think eight months at that time, so I really had to put my best salesman hat on and  and go tell the CFO and COO and everybody hey we want to do this and they've never done it before  and they never really been in that 3PL world. So, I think from that standpoint, Ryan and and myself  were kind of holding hands through this whole thing. The second thing is, when we went out to  bid this with DHL, we were at probably a low-end number of units a year. When we began to do  business with them, at the same time, our business decided to begin to transform its store base. And  so we we began to close stores is what happened. Underperforming stores or stores that were coming  up on lease. DHL was with us through that whole thing. I think we, I don't know the exact number,  but I think we said, hey, this account's going to be a million units a year. Well, last year  was about 1.6 million units. And all that was due to us closing stores and send that back to DHL for  them to process that. And I got to say during that time that they always stayed within the SLA. So I  was able to take additional units , they were able to process it and I was able to get that back into  this facility here in West Jeff and put it back in stock to sell it again. And that is a huge  win for us. It's not only from a costing point of view, but from my our standpoint,  we could have never flexed up to the amount of people that DHL was able to flex up to and take  care of that business. You don't expect to do that. We didn't expect to do that, but it was  one of those things that, they really stood by us on that and got us through that whole situation,  to the point where I don't think anything ever aged over 14 days, which is pretty incredible  because if we were to do that here with our own in-house team, you could probably double that  number and aging inventory sitting in somewhere in the building. That's just true testament to  what they're all about. And it's always nice to go back to the C-suite a year later and say, hey,  we saved X number of dollars by doing this. Oh, and B we're able to take the working capital and  put it back into the operation so it could be resold again. That's just a huge huge win for  me because again they begin to trust you a little bit more if you bring the next thing to the table  is what it is. Yeah. So within those 14 days what activities take place, Ryan and then forecasting  is tough and in a best-case scenario right I think it's harder on the return side. How do you absorb  unexpected volume and flex up to do that and and still hit some of the performance criteria that  John was looking for? Sure. Yeah, it's a testament to two things. One is operational excellence and  a team that's looking at the forecast, driving their labor based on a forecast, but like you  mentioned returns is really tough when it comes to forecast. The best way you can forecast returns is  essentially saying what is the amount of volume that we're selling over a period of time and our  returns is typically X% of that volume and that's what you think your returns volume is going to  be. And to John's point when you start having things like store closures, throws a little bit  of volatility into that forecast. The benefit that we have within the DRN is we have not  only a national network of buildings all over the country, but our buildings are also multi-client  facilities. So within one four wall and where we process for John is a facility we call Rockville.  It's in Indianapolis. We have upwards of 20 to 30 different clients in that facility all of  whom have different peaks and valleys throughout the season, throughout the year. Wee have some  clients that have very high returns around the Christmas time and then it drops off through the  spring and then in the summer it gets really heavy again. We were able to take that different staff  that we have across that building who are very familiar with not only returns but our platform as  well. They're also familiar with apparel for other brands and we're able to cross-train them through  our system to be able to to move from one client to another to handle those different peaks that  we get so we can absorb it a little bit better during the seasons. It's a huge benefit to be able  to have that multiclient site that shares some of those overall expenses and also allows us to share  labor a little bit more fluidly than you otherwise would. Interesting. Makes sense. So, John,  whether you're talking your experience at Torrid or other retailers from a scaling perspective,  what do you think are the key elements to enable you to take on more volume or shrink down when  demand starts to to eb? Well, again, I think it's, you know, just kind of what Ryan just talked  about. It's one of those things that in a regular distribution center, you have the availability to  do that, but if you have huge outbound going on, on a seasonal reason, it kind of puts all  that operation on the back burner, plus you end up pulling those people over to help out.  I think that's the key point is and that's really from the story, they were able to scale up and  down and I really think the reasoning behind that is because that's what they really do. The  question that you always got to ask is, it really can't be another department inside your operation  that you're supporting. And that's really how we sold it with our folks. We got to give this to  the professionals to have them do it. And because of that, they were able to do it at a lower cost  and they were able to turn our inventory a lot faster for us. That's probably the key element  in that you got to be able to take and move their own folks. But that's what they do. I mean I go  in the building and they're doing returns. It's their business. That's where you want it to be.  Yeah. And I'll add on to that if you don't mind, is when I applied to work within the DRN 15 years  ago. I had an interesting interview with a gentleman who had been here at the time for  20 years. And he was talking about all the focus they put on returns. And at the time I had been  working for a WMS provider based out of Atlanta. And I said, you know, when we go to a site and we  look at the overall functional flow of a facility, we spend two weeks talking to every operator in  that building and we design everything from how you receive, how you ship, and everything that  happens in between. I said, we spend five minutes talking about returns. So, how does this company  focus or this division of a company focus only on returns? The guy sat there for about 20 seconds  and then went, well, because people like you only spend five minutes talking about it. It's such out  of sight, out of mind. Throw it in the corner. It is what we do. As John mentioned, it is the  thing we are known for. The other analogy I would use that he later said was you don't go to Five  Guys and order a salad. You order what they're good at, which is hamburgers, right? And so in a  world like John's world where he's so focused on fulfilling orders and focusing on the customers,  you don't hear apparel brands go out there and say our most important thing is satisfying a customer  and making sure their returns are good. Like you don't want the return coming back, right? So let  that go to somebody who does it for a living, somebody who focus on it and loves it. Will,  you mentioned earlier the difference between returns and forward. Whenever you talk to anybody  in the returns or who's looking for a solution for returns, they'll always preface it like, "Oh,  our inbound looks ugly." And our feedback will always be, it looks beautiful to me because that's  what we're used to. It's a pile of everything you can imagine thrown together. That's what  we expect. That's what gets our excitement up is seeing returns pallets coming into our building,  whereas most companies don't want anyone seeing that. It's what we love. Yeah. That's great. John,  you know, Torrid has a good reputation in the market with its customers and their loyalty to  you. And I know you talked about what I would just describe as sort of a fluid returns process or an  easy to return kind of approach that you guys have clearly taken. I just wonder how you think about  that when you have multiple channels to market obviously multiple channels back. How does that  set up and how do you think about making that as sort of frictionless of a process as possible?  Yeah, I think the first part of it is that we've kind of talked about is, you know,  from our standpoint, you know, I get a return, I want to go through the inspection of it. I want  to go through what they do up there. I want it refolded. I want it re-bagged and then I need to  get back into the DC because I want to resell it. Part of that piece of it is I'm taking a return  that somebody returned and I'm really re-bagging it, refurbishing it, and then I'm putting it back  and I'm selling it to somebody else. That's the first thing. It has to go back out as brand new.  And I think that check mark has always been taken care of by DRN. The second piece of it  is the speed of it, because I don't want to hold inventory either in Rockville or in West Jeff. I  want to get it back on the site. I want to get it out of here as quickly as possible.  I think those are probably the two biggest components of that. From the other standpoint is,  we treat returns as a loyalty moment is what it is. So, a customer returns something,  we want them to have a seamless experience with that. We want them to be able to return it,  and we allow them, we have a system that they can begin that process with. They can, take it  to a Torrid store and return it there or they can send it back to us. Very soon we'll have other  opportunities for them to take it somewhere else. But for right now, we want them to be able to not  get caught up in it and to receive their credit as quickly as possible. And that's the other factor  that we've seen in the last year, is that they're able to do that. And we have customer service just  like everybody else. And you rarely ever see someone calling up saying, "Hey, I didn't get  my credit fast enough or I never got my credit." is what it is. And you don't ever see, "Hey, I got  damaged merchandise when I ordered something from Torrid's website." I think the customer population  accepts the fact that we give them that seamless loyalty opportunity and I think that definitely  is due to the fact the partnership that we have with Rockville and DRN. Great. Ryan, just thinking  broadly about your many customers, when somebody new comes in like John did a few years ago,  what are kind of the first, second, and third things that you're looking for to understand,  so that you can set them up in a way that's going to be successful? Yeah. The first is what is their  primary need? And it just depends on the client, but in most cases, it's very similar to what John  mentioned. It's we need to make sure our consumers are taken care of, that the customers are getting  their credits back. And then second, how quickly can we get the product back in the stock? Outside  of that, there's very key things like what is the volume, what is the seasonality so that we  can make sure we labor plan accordingly for that. But then it's also the criteria that's involved in  folding the shirt. I know a lot of people don't like hearing this, but not everyone can fold  a shirt. And certainly different brands require different levels of folding. There are some brands  out there that if you go purchase them online and it gets returned and you get it at your house,  you'll never be able to get it back into that same form in which you received it. And that's  important because a brand like Torrid that John mentioned, they've got so much loyalty tied up  into the brand that consumers know what to expect. There's an experience in receiving that product at  your home. It's important that we understand what that requirement is so that when our team is being  trained to fold and inspect that garment to put it back in the stock, that we're doing it in a  way that if one of John's customers orders that that item, they can't tell that it came from the  DRN. They would think that this is something that was produced off the manufacturing line,  put into distribution, and sent to them without ever having to stop anywhere in between. So,  understanding that requirement is key when you're in something like the apparel space. But outside  of that, it's other key things like you know how important is it the packaging that we discussed,  does the item need to go into a certain size bag based on the size of the item. I mentioned already  the volume and the disposition. So what do we feel in terms of how much product should go back in the  stock and what are the requirements associated to validating that an item goes back in the stock.  And one thing I'll tell you that I've learned over the years is that, in especially again going  into apparel, always have to turn certain items inside out because you want to make sure there's  another there's no other items within that that garment. And the same thing goes with pockets.  We've received things from credit cards to wedding rings to tissues or masks or whatever you name it,  we find it in pockets as we do our inspections. If you put yourself in the seat of a consumer,  it's important that you check all of those because if a consumer receives a product, they think it's  brand new and they reach in the the pocket and they pull out John Ball's credit card. They're not  going to be too happy to know that somebody else has used it, but they might use that credit card.  Nevertheless, you just want to make sure that the item, you give the experience to the consumer that  item had never been returned before. Yeah. Well, I would I would use John's credit card for sure  and I will willingly admit that I am not a good folder. So, I may be rare in that, but never been  very good at that. I'll second that. Okay. So, last question for both of you. John, you can you  can go first because you touched on this a little earlier about going to the C-suite, but you know,  stepping away from Torrid maybe it's the same advice, but when you would approach a CFO, CEO,  chief operating officer around the the subject of returns and what the kind of keys are to driving a  business success with a returns network or returns operation. What would some of your advice be?  Yeah. So, it's a great question and actually I've had to answer that question before, but you know,  the way I look at it is don't view returns as a back-end problem. View it as an inventory  opportunity because investing in faster returns and stock cycles directly improves the full price  selling windows is what it comes down to. So, you know, it sometimes becomes the problem of the DC.  I send it back, it's now your issue. But I think you got to bring that back into the revenue stream  and say, "No, it's something that, you know, we are going to be able to get this inventory back  and we're going to put it on the web and we're going to sell it again." And that's really what  we've seen over the last year. So, we've seen, we track it. I mean, just like everything else  in our world, we, you know, here at Torrid, we track that. So returns come back in. We see  how many cycles that it may go back out and come back in. But we also look at the fact that yeah,  it came in and it was sold within 3 days from the time we put it back in stock. We see a very nice  return from that. And that's the biggest thing. You got to pitch it as an inventory opportunity  and not really as a back-end problem. Okay, great. Yeah, Ryan, how about you? Yeah,  very similar is you can't look at it as just a cost. So in if you're looking at returns and you  say I want to get down the path of outsourcing returns to an expert, someone like DHL and the  DRN who knows and loves returns, you can't just look at the price tag on it and say man this is  more than what we're charging today or what we're paying our employees today to do returns in our  in that area of the warehouse because there's other opportunities within there that you might  not be collecting on all the things that John mentioned and the experience of the the users,  the productivity that we're able to achieve. And then also the opportunity costs associated to  it. If you're doing this in your own center, how much space are you allocating to that?  What could those employees be doing to grow to drive new profits within your center as opposed  to focusing on returns? Give it to the experts. Give it to somebody who knows what they're doing,  somebody who loves it, and somebody who will treat it like their highest priority. Well,  that's a great way to end us today. Great conversation, really interesting stuff,  and it's always fun to listen to two people like you who clearly have a great working  relationship and partnership. We'll look forward to hearing a next DRN update hopefully soon,  but between now and then, wish you guys both luck. Have a good summer and keep it up. Sounds  good. Appreciate it. Thanks a lot for having me on today, Will. Good to see you, too, Ryan. If you enjoyed today's episode, be sure to rate us and subscribe to us on Apple Podcasts,  Spotify, or wherever you get your podcasts. You can also listen to  our entire library of episodes on our website, dhl.com/ABNBpodcast. See you next time.