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Whole Foods gives Amazon hundreds of return centers. A startup wants to give other e-commerce sites the same.

Carlo Allegri | Reuters

When Amazon acquired Whole Foods last month, it bought more than a grocery business; it also purchased 400-plus stores that could serve as return points for Amazon orders.

Now, a startup called Happy Returns is building a nationwide network of return points inside malls and mom-and-pop stores in an attempt to give other e-commerce sites a similar footprint.

The company has struck deals with several mall companies like Simon and Westfield to accept returns at existing Guest Services counters or to rent out space for a Happy Returns return desk in their shopping centers. The startup now has 40 return locations across 14 metro areas in the U.S. and is working on adding many more.

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On the other side of the network, Happy Returns is signing up young e-commerce sites with few or no physical stores — like Everlane, Eloquii and Chubbies — to allow their customers to return items to malls near them.

The end goal is to play matchmaker between online retailers and brick-and-mortar stores to benefit three constituencies: E-commerce sites, by reducing their return costs — Happy Returns charges them a per-order fee that's lower than the cost the site would pay to offer a free mailed-in return to its customer; malls and brick-and-mortar stores, by boosting their foot traffic; and online shoppers by giving them a way to get quick refunds without the need to print out a return label or find a box in which to ship an order back.

"We've been saying for two years, returns are an overlooked friction point in the e-commerce experience," co-founder and CEO David Sobie said. "If you ask people what they want in returns, it's free, fast, easy and in-person."

To help fund the expansion of their returns network, Happy Returns recently raised a $4 million Series A led by Upfront Ventures. The venture firm's partner Greg Bettinelli has joined the startup's board, as has Bonobos co-founder and former Trunk Club CEO Brian Spaly.

In addition to the 30 mall locations, Happy Returns has also partnered with 10 small brick-and-mortar shops that want extra foot traffic to their stores and which are not competitive with any of Happy Returns' e-commerce partners. This experiment may not work, as finding the right type of shop that is interested is time-consuming.

But if it does, this approach will help Happy Returns reduce costs as it scales its network; the startup does not pay these shops like it does with malls — the stores are simply interested in getting potential new customers into their shops. About one in four who are coming to return a package end up buying something from the shop.

Another challenge to the model is that Happy Returns relies on its e-commerce partners to market the return option to online shoppers. So far, most haven't built it into the return flow on their sites, making it harder for online shoppers to discover. But if Happy Returns continues to grow its network of return sites and truly does reduce return costs in the process, you'd expect more e-commerce partners to more prominently feature the option.

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