Returbo was founded in 2010 and is the market leader within the secondary market for e-commerce products. Therefore, Returbo is focusing on several megatrends in e-commerce and satisfying consumers, online retailers, and manufacturers alike. We enable consumers to access thousands of brand products at unbeatable prices via more than 30 sales channels (e.g., eBay, Amazon, Billiger.de). Moreover, we are providing retailers and manufacturers with an efficient way of marketing secondary market goods such as customer returns, end-of-lifetime goods, and overstock.
By means of substantial investments in the Returbo platform (i.e., in our logistics center, IT system, and team development), we have recently become a profitable business. Consequently, this growth financing campaign has a lower risk than funding campaigns of start-ups that have not yet reached the proof-of-concept stage. Unlike many start-ups, Returbo is already able to collaborate with lenders.
Our current shareholders and investors include people and companies that provide us with strategic benefits (e.g., customer acquisition through portfolio synergy), for instance Martin Sinner (founder of idealo.com and current online CEO of Media/Saturn group), German Startups Group (shareholder of numerous e-commerce businesses such as Junique.com, Katzenland.de, Hundeland.de, and Amorelie (which has achieved an exit)), Investitionsbank Berlin (IBB), and Harbert Venture Loan Fonds.
Having reached breakeven point, we have decided to partially finance growth with the help of the crowd in order to increase brand awareness and improve communication with consumers.
We can explain our use of capital during the growth stage very easily: We plan to scale up our successful model by intensifying our marketing & sales activities and by expanding our IT infrastructure, particularly in the area of customer relationship management (CRM). While doing so, we can use previous investments in our platform because only 20 % of the capacity of our logistics center is currently being used, which is why we need relatively few capital to significantly increase revenues and profits.
One of the most important reasons why we have chosen to launch a crowdfunding campaign is that Returbo has not placed much emphasis on its public image thus far. We deliberately decided not to place too much emphasis on publicity because we first wanted to occupy the very lucrative market ourselves, to create barriers to entry for potential competitors by developing our innovative Returbo platform and making cooperation agreements, and to defend and improve our position as the market leader. Through this campaign, the relaunch of our website, and other PR activities, Returbo is now actively raising public awareness for the first time. Through our expansion, we want to achieve a larger market share and ensure that competitors may enter the market less easily.
A secondary market is a market for all transactions and products that may not take place or be sold through their primary sales channels. For instance, a secondary market is typically used for customer and retailer returns, B-stock, refurbished products, floor samples, irregulars, and end-of-lifetime goods.
These products are often sold unchecked and/or unsorted to remainders dealers, exported to a third country, or simply destroyed, which leads to high levels of depreciation for some online retailers and manufacturers.
Returbo cooperates directly with online retailers and manufacturers, thus providing consumers with a reliable way of accessing the secondary market, where they may purchase high-quality products at very good prices.
Examples of Successful Sales through Returbo (despite these low prices, Returbo has achieved an average gross margin of more than 50 % in 2015 so far)
As there are several unreliable players within the secondary market, we are also providing consumers with a secure shopping experience in addition to the lowest price. Studies by MarkMonitor (Thomson Reuters) prove, for instance, that as many as 10 % of bargain hunters in 2014 used websites selling counterfeit goods and thus had a high risk of becoming fraud victims despite a general increase in security on the Internet.
We have created a reliable offer: Our customers can always be sure to purchase original goods because of our in-depth analyses and our direct contacts with manufacturers. Our recent customer reviews and awards show that this extensive service affects customer satisfaction:
By means of Returbo, we have created a unique and highly innovative platform that enables efficient handling of secondary market products such as customer returns, overstock, and end-of-lifetime goods and that enables lucrative secondary marketing of goods through many sales channels.
The Returbo platform
One of Returbo’s major advantages is that unlike conventional e-commerce businesses, we focus not just on a single sales channel or on very few sales channels. Within the secondary market, not all product categories or product conditions may be sold equally well through all channels. Because of our unique network, we are able to offer each item through the most efficient sales channel, thus achieving maximum revenues in relation to marketing costs.
Some of Our Sales Channels:
Based on our IT system, we are able to decide within a few seconds whether we should sell a TV set on eBay, Amazon, markenbilliger.de, or Groupon. Moreover, we may sell certain products solely abroad, not display these products in specific channels (e.g., in price search engines), or display these products only at certain times and on certain days, thus benefiting our customers as much as possible. Such unique services have made us a preferred partner of online retailers and manufacturers in no time.
In the area of logistics/inventory management, humans are increasingly considered a disruptive influence rather than a valuable resource because of the increasing degree of process automation, as negative media coverage of online retailers has shown.
Returbo is doing just the opposite by focusing mainly on people rather than machines. Indeed, our employees’ competence and passion make them a key factor in our company’s success, so our employees are very important to us. Together with our tailored IT and warehouse infrastructure, these people make sure that all processes are running smoothly. Since secondary market products are very individual, our well-trained employees need to pay close attention to the characteristics of each product, which is why these people will remain a key element in our success in the future as well.
So far, many online retailers and manufacturers have had only rudimentary strategies for the secondary market that may be significantly optimized:
Online retailers and manufacturers traditionally have their own warehouse or make contracts with external logistics companies that handle transactions for them. Customer returns are always individual items that have to be checked carefully, especially if they are technical devices. While many logistics companies offer this service, they do not specialize in this small-scale business at the process or system level and are thus unable to offer handling and warehousing at competitive prices. Consequently, the costs of processing returns often exceed potential revenues, which is why many goods are destroyed immediately or exported to third countries.
So far, many companies have been selling returned goods to remainders dealers at low prices or have been selling the goods themselves at a discount because they have been lacking sales channels within the secondary market. This status quo is costly and inefficient, generates few or no revenues, and is often a worry for retailers and manufacturers because remainders dealers tend to be unreliable and sometimes even shady market players that purchase goods at low prices, use them in an untransparent fashion, and often have a poor payment history.
By means of the Returbo platform, we have created an ideal solution for online retailers and manufacturers because we take care of both the handling of goods and the marketing of secondary market products. Therefore, rather than have expensive logistics companies handle and store returns as before, sell returned goods at very low prices, or even dispose of returned goods for financial or image reasons, our partners have us manage the entire logistics process for them, thus significantly reducing both complexity and depreciation due to returns and secondary market goods.
Consumers also benefit because they receive checked brand products in mint condition and at unbeatable prices. At the same time, we protect consumers from shady players within the secondary market so that definitely none of our customers will receive counterfeit or defective goods.
Consequently, our solution is a classic win-win-win situation because – unlike other business models – Returbo benefits EVERYONE involved, that is, manufacturers, online retailers, consumers, and ourselves (because of the high profit margins we achieve).
Returbo Has Created a Win-Win-Win Situation
Our business model helps us achieve KPIs that are well above the industry average. In fact, our business is already profitable when customers make their first order, whereas other e-commerce businesses invest up to 300 % of their revenues in customer acquisition. As a result, other businesses have to rely on customers who make several orders if they want to operate profitably. We, on the other hand, are not facing this problem because we achieve attractive profit margins as early as during a customer’s first order, and each additional order increases our profit margin more than proportionally.
In 2015, we have thus been able to achieve a gross margin of over 50 % by selling secondary market articles, and we are also generating revenues by accepting, checking, and refurbishing goods; these revenues are independent of our actual sales activities.
In terms of customer returns, we have also achieved a very good rate of less than 8 % because of high customer satisfaction, so we are significantly below the industry average of more than 20 %.
Prior to focusing completely on the secondary market, we gained some experience in the typical e-commerce marketing of standard goods and thus know the pain points of retailers and manufacturers first hand. As we were unable to find a suitable partner within the secondary market ourselves, we created a secondary market platform and, in discussions with other market players, noticed that virtually every manufacturer and retailer shares our problems and worries.
In other words, we identified a real, common, and increasing problem that we did not want to solve solely for our own benefit. Having focused simultaneously on the first and secondary market for some time, we noticed that key performance indicators within the secondary market – such as the gross margin, marketing costs, and return rates – are much more attractive than within the first market and that there is huge demand within the secondary market. Therefore, in late 2012, we made the decision to focus solely on growth within the more profitable secondary market.
The result has been very convincing: Thus far, we have experienced growth rates of over 100 % each year. In 2015, we achieved a gross margin of more than 50 % by selling secondary market products and reached breakeven point as a company; this year, we will most likely surpass revenues of €6m.
Today, the Returbo team consists of more than 40 employees that help us sell an upper five-digit number of products to customers each month. Since we founded Returbo, we have shipped more than 450,000 items and have made many consumers happy. This year, we have already shipped over 70,000 products to consumers and received more than 30,000 positive reviews.
Our previous successes and our renowned customers prove that people appreciate our service:
Trend 1: Boom in Online Retail
Unlike stationary retail, online retail keeps growing and increasing its market share. Projections assume that annual revenues in online retail will increase from €45bn today to over €100bn within the next 10 years. As a result, online retail still has huge potential despite its rapid growth in the past, and it provides online retailers with many opportunities for development.
Trend 2: “Love it or return it”
In light of increasingly rapid growth in the online retail sector and an increase in the speed of online orders, consumers’ expectations of online retail have increased as well. As large online retailers like Amazon, Zalando, etc. advertise their easy return policies, many people have developed an “I may return everything” mentality, and consumers now return products for various reasons (e.g., wrong color or minor faults). As a result, the number of customer returns has increased dramatically over the last few years. In fact, Zalando is reportedly struggling with roughly 50 % customer returns, whereas the customer return rate of 37 % of German retailers used to be above 20 % in 2013. These rates will most likely keep rising, thus increasing pressure on online retailers.
According to a study by the University of Bamberg, total revenues of approximately €40bn correspond to an estimated 286 million customer returns. This number corresponds to a line of packages as long as 114,400 kilometers – almost three times the circumference of the earth.
Trend 3: Transparency of Prices through Price Search Engines
At the same time, consumers are increasingly paying attention to prices. To 73 % of Internet users, a product’s price is the most important aspect during shopping, and the number of so-called “bargain hunters” and “smart shoppers” has increased significantly. According to a BITKOM study, 58 % of Internet users are already using price search engines (e.g., guenstiger.de or Idealo.de) to search for the best bargains online. In addition to price search engines, people are increasingly using mobile apps when they go bargain hunting, which enable them to scan a product’s bar code in the store and to compare prices online within a few seconds. In other words, prices have never been as transparent as they are today. This development increases the pressure on online retailers and, ultimately, the costs of customer acquisition, which in turn threaten companies’ profit margins.
As Many as 58 % of Internet Users Compare Prices Online or through Mobile Apps