“A lot of stuff was going out one shipment at a time anyway,” Faust said. “If we’re going to do that, we need to focus on eliminating the waste from the source.”
The new model was piloted with five retailers over the summer, including menswear brand Rhone. So far, it appears to generate more activity than its previous model. Before, Olive handled a few hundred orders a week. but now the average is 2,500 orders a week across all brands, Faust said.
The shift comes during a growth spurt in the reusable packaging space, with the entrance of new brands like Olive, Boox and Returnity. Smithers in a July 2022 market report found that the global refillable and reusable packaging sales grew from $35 billion in 2017 to $40.1 billion in 2021. And the industry is expected to grow 4.9% annually to $53.4 billion 2027, according to the report. For its part, Olive raised $15 million in a seed round in December 2020.
Faust, who was also the founder of Jet.com, said the company’s new iteration will stand apart from the crowd because it matches retailers’ costs on whatever they’re paying for current shipments. And, in addition to handling returns and exchanges, Olive will also provide a new service to customers: consignment pick-up in the returned boxes.
“Now we have a very solid use for that return trip,” Faust said. “Instead of picking it up empty, we give the customer the option to put used clothes in that we give to a consignment service on their behalf.
He anticipates adding five to 10 new brands each month, and said there are about 50 brands currently having discussions with Olive about signing on.
“The concept of reusable packaging is still a relatively new one,” Faust said. “But where I think we have a lot of power in our model, especially in terms of supporting brands, is we power the end-to-end experience and we do it with no incremental cost to brands.”
Logistical learning curves
At its outset in 2021, Olive was a consumer-facing product that allowed shoppers to request reusable packaging from participating retailers. The brands would ship those orders to Olive’s warehouses to be bundled up with any other products the shopper was getting that week. Then the shopper would receive all the orders in Olive’s reusable packaging on a scheduled day.
But tactical challenges ensued. First, Faust said, there was the waste issue of the non-reusable packaging that the products were coming to Olive’s warehouse in. Customers might also mistakenly send orders from non-participating retailers to Olive’s warehouse, thinking they could be consolidated. And then there were timing concerns. If the customer’s selected ship date was Wednesday but one of their orders wasn’t coming in until that morning, it wouldn’t make that week’s shipment.
“A lot of customer experience challenges of doing that consolidation made it less impactful than we anticipated,” Faust said.
Throughout the first year, though, brands were asking for an end-to-end experience that would place the orders in the packaging from the get go, Faust said.
“Somewhat naively, I said ‘There’s no way to make the economics work, because we’ve got to get a number of orders in a delivery,’” he said. “But we had enough brands ask for it that we said, ‘Let’s just go for it.’”
On the external side, the new version of Olive is still an option that shoppers have to select at checkout for no additional cost. But instead of having their order shipped to the Olive warehouse for consolidation, it will come directly to their house in Olive packaging.
“This is a much more scalable model and the consumer experience, especially when it comes to things like delivery speed,” Faust said.
Olive has its own team of uniformed drivers that pickup the reusable packaging in the New York metro area. Elsewhere, Olive packages will be sent and picked up by carriers like FedEx or UPS. Either way, the consumer uses a QR code on the original packaging to signal that the package is ready for pick-up.
Internally, the new model means potential growth for Olive. Whereas, before, it earned about 10% commission on each sale, it will now be paid directly by brands for deliveries and returns like any other logistics provider. Olive will match whatever the company is paying their current logistics provider for deliveries and returns, without any additional service fees for the reusable boxes or Olive’s service.
That cost matching is one selling point that Faust hopes potential customers will see as a value proposition.
“We power the end-to-end experience, and we do it with no incremental cost to brands,” he said. “You can provide all these things to your customers: free delivery, pickup for returns, no waste to deal with and the opportunity to consign items very easily … if you just buy the packaging outright, you’re going to have to navigate that whole experience yourself.”
Olive also acquired Linda’s Stuff, an eBay reseller, to handle the consignment operation of the business, and will receive a cut from those sales.
An experimental industry
Tim Debus, president and CEO of the Reusable Packaging Association, said activity in the reusable packaging space is booming. The organization has been around for 20 years, and is hosting its largest-ever conference this fall. Overall, the industry is valued at $100 billion, according to RPA’s 2020 report.
The growing popularity, he said, is driven by a few factors, including a push for more sustainable practices, a more stable supply chain and a data-driven approach to logistics.
“Macro forces are driving greater demand in reusable packaging systems,” Debus said. “There’s been some great movement in this area, but we’ve really just scratched the surface of how reusable items can move retail items,” he said.
Perhaps most critically, consumers have to become accustomed to the new models, whether that means leaving a box at their doorstep or having a new option to request at checkout. This requires education and engagement on the part of brands, Debus said.
“It’s not that one company is going to solve it,” he said. “You’re going to have to have partners, and in this case, the end user and the consumer, participate in the programs.”
Faust said in order to continue scaling Olive, the company plans to continue scaling by partnering with logistics businesses. This will allow Olive to reach multiple brands that operate out of the same warehouse, he said. The first is Bergen Logistics.
Faust also sees growth potential in the consignment arm of the operation. He said this will appeal to consumers who are trying to cut down on the amount of clothing they have and leading to a “one in, one out” shopping philosophy — plus they’ll get a cut of their consignment earnings.
“This could be a new consumer behavior that allows people to manage a much less cluttered lifestyle,” Faust said.