Inside a large warehouse in Pennsylvania, dozens of black robots dart and swirl across a polished concrete floor. They resemble Roombas with a skinny highboy table on top. Geekplus, the company that makes them, calls them “dancing robots,” and for good reason — they really do look like dancers in the midst of an intricate performance.
Mesmerizing as it is to watch, what the robots are actually doing is more practical. We’re inside one of the three Happy Returns Hubs across the U.S. that, together, process millions of returns every month. The robots are shuttling a seemingly endless supply of packages from the trucks they arrived on over to hundreds of waiting boxes, each designated for a different retailer.
Those boxes will then be shipped back to the retailers where the products originated, in the never-ending ebb and flow of goods sold-shipped-returned-resold that is commerce today. The need for a company like Happy Returns, dedicated purely to the end of that cycle — the return — has increased exponentially over the last decade and continues to grow.
The rate of goods returned in the U.S. has nearly doubled over the last six years, now accounting for roughly 17% of all merchandise sold, according to Timothy Fehr, COO of Happy Returns, citing research conducted in partnership with the National Retail Federation. In fact, as Fehr pointed out, the nearly $900 million of merchandise that was returned in 2024 is equal in value to U.S. military spending last year.
As Goes Ecommerce, So Go Returns
The growth of returns isn’t solely a factor of the commensurate growth in ecommerce sales. Yes, ecommerce’s share of total retail sales continues to steadily expand every year, but changing consumer behaviors are also behind the increase in returns, in particular among those digital-native Gen Zers for whom ecommerce is considered not an innovation but a fundamental right.
“Happy Returns is about 10 years old, and we’ve seen a real evolution of how merchants think about returns, particularly as younger consumers [account for] a higher share of overall spend,” said Fehr in a session at the NRF Big Show. “If you’re 25 years old, your relationship with ecommerce is fundamentally different than if you grew up shopping in stores. The way they think about returns is that this is just how it works — we’re going to buy a bunch of stuff and expect to return a lot of that stuff. Merchants are realizing this and adapting.”
Still, it’s a costly problem for merchants. Enter Happy Returns, which promises to make the process easier and more cost-effective, both for the retailers that use its service and their customers.
“[The fact is when you shop with a brand] you’re buying the returns experience, you’re not just buying merchandise,” Fehr added. “And the expectation, which has been set and subsidized by venture capital for a decade, is that it is free and easy — I think you’ll claw that out of the American consumer’s cold, dead hands. When we talked to [merchants] in 2016 and 2017, the immediate response was, ‘Why on earth would I make returns easier?’ That mindset is changing. Now, the response is, ‘How can I do this without spending a bunch of money and opening myself up to fraud?’”
We began our day at a newly opened UPS Store in Wyomissing, Pa., one of the nearly 8,000 Return Bar locations across the country. In addition to more than 5,000 UPS Stores, Return Bars also can be found at select Ulta Beauty, Staples and Giant Eagle locations across the country, meaning that 87% of Americans live within 10 miles of a Return Bar.
The UPS Store is actually the newest addition to the Return Bar fleet; it came as part of UPS’ acquisition of Happy Returns in late 2023. Happy Returns was previously owned by PayPal; it had been acquired to further the fintech company’s ambition to expand beyond payments and become a “digital commerce enablement engine.” But as the ecommerce boom days of the pandemic subsided and competition in the digital payments sector increased, PayPal decided to refocus on its core business.
The sale of the reverse logistics-focused Happy Returns to one of the largest logistics operators in the U.S. made sense, and Fehr affirmed that the relationship has been “incredibly synergistic.” Those synergies go beyond simply “getting” each other’s business:
- Within one week of the acquisition being finalized, Return Bars were up and running across all UPS Stores;
- UPS trucking services are used to ship products from all Return Bars across the country to the three Happy Returns Hubs and then back out to retailers; and
- Happy Returns was first introduced to Geekplus’ “dancing robots” because UPS was already working with the company in other areas of its business.
Those robots are central to how Happy Returns plans to continue to scale its business. Efficiency at the Pennsylvania warehouse has doubled since the robots were deployed in August 2024, and they are now also being used at the company’s two other hubs in Southaven, Miss. and Valencia, Calif.
Whereas before items were processed in a “cascading series of sorts,” handled primarily by humans with the help of carts or forklifts, now the humans on the floor remain in two distinct locations and the robots do the legwork (metaphorically speaking).
An “Induction Station” from above. (Image courtesy Happy Returns)
Along one side of the warehouse floor are a series of truck bays where UPS drivers drop off boxes from the Return Bars. “Induction stations” are positioned directly behind each bay, with anywhere from seven to 11 stations open at any given time.
Workers unload the packages from the truck onto a small conveyor table at the induction station behind them. Employees at the induction stations then open the boxes and scan the bagged returns one by one, placing each return on the rubberized tray of the nearest Geekplus robot, which queue up near the induction stations when they’re empty. The robot then whirls around, navigates through the roped-off section in the middle of the floor and heads over to the opposite side of the warehouse, where open boxes await.A Happy Returns Gaylord box that will be sent back to a retailer once it’s full. (Image courtesy Happy Returns)
Whereas the induction station is crowded with jumbled returns from hundreds of different retailers, each box on this side of the warehouse is dedicated to a single retailer. The boxes vary in size — from 24 square inches to massive 4-foot-tall “Gaylords” — depending on the size of the merchant’s business. The robot’s tray, which features its own small conveyor belt, shifts in the right direction and rolls the product into a box, with a human overseeing the final packing, then whirls off to get the next package.
Once full, the large Gaylords make their way to shipping pallets and the smaller boxes are combined into more Gaylords. All of is tagged and lined up, ready to be picked up again by UPS and shipped back from whence it (originally) came.
For a more in-depth (and professionally shot) video of the Happy Returns robots in action, check out this video.
A Modular Automation Solution for a Growing Business
The Pennsylvania Hub currently uses about 180 of the robots at any given time, with a human staff of around 30 to 40.Geekplus robots queue up on the hub floor. (Image courtesy Happy Returns)
“There’s really a lot happening in industrial automation,” said Fehr. “Historically, it’s been all conveyor belt-driven. Conveyors tend to be great for really high-capacity jobs, but they’re expensive and inflexible. Once you build that thing, that’s what you have. But we grow really quickly, so committing to a five-year capacity schedule is not really doable for us. [The Geekplus solution] was significantly cheaper, and it’s wonderfully modular insofar as you just add more robots. We’ve already added a couple of tranches of additional robots as volumes have increased.”
When asked if the introduction of the robots resulted in layoffs, Fehr responded in the negative, saying that the robots were added at a moment when Happy Returns was already increasing its capacity.
It did mean that the company didn’t have to hire many additional humans for the increased workload; however, Fehr sees that as a benefit: “Robotics help us keep the workforce small, and that helps us increase the average tenure of employees,” he said. “It’s really hard to build and maintain culture in a highly attritional, high headcount, growth environment. We have spent years managing our attrition down. Now our attrition is very low, and we’re very proud of that. Obviously the first-order benefit of being more productive is it’s cheaper, but another really big benefit is we have great employees and we keep them.”
The robots are Happy Returns’ “first genuine push into bona fide automation,” but it won’t be the last, said Fehr. The company plans to continue to incorporate more automation into its operations this year and beyond.
Helping Retailers Reduce Returns Fraud
Managing the reverse logistics of returns efficiently “is very hard to do,” Fehr said. “There’s a lot that goes into and it’s taken years to perfect.” That is evident at the Hub and the same goes for the consumer side of the business, the Return Bars, which Happy Returns continues to work to perfect.
One relatively new addition on that end of the equation has been product verification via barcode scanning at the Return Bar drop off. The process is a bit counter to Happy Returns’ original value proposition, which was focused on making returns quick and easy for customers. However, as retailers battle increasing levels of returns fraud this part of the offering has become much more important to Happy Return’s clients.
In the NRF study, 93% of retailers said fraud and other exploitative behavior is a significant issue for their business. Returns fraud specifically ranges from organized criminal rings to individuals engaging in “friendly fraud,” such as a consumer asking for refunds on five items but only sending back four, or sending back a lower-priced item than the one that was approved for return. Verifying that a consumer has dropped off the correct product at a Return Bar can help reduce some of this fraudulent behavior.
Happy Returns integrated barcode scanning into its process approximately 18 months ago. Customers still don’t have to bag or box their returns, but they do have to wait while an associate scans each item to verify that the return matches what was approved by the merchant. “We see item verification as a non-disruptable fraud prevention tool,” explained Fehr. “You have to physically bring the actual item, and it has to have the actual barcode on it.”
The process adds a small amount of friction to the return process, but for merchants it’s worth it. And Fehr mentioned that as more and more retailers incorporate RFID into their hang tags, the friction point could be eliminated, since scanning would no longer be required.
In this and many other ways, Happy Returns clearly has its eyes on the future. The volume of returns the company handles has increased 300X since 2018, and Fehr said he sees more growth on the horizon, especially given that most of the products Happy Returns processes are apparel, which leaves a whole world of products out there that Happy Returns hasn’t tapped yet. “It’s a big market,” said Fehr. “Another 300X increase is probably out of the question, but without a doubt we can be far larger.”