Sustainable Packaging

CEO Mike Newman / How to be successful with Reusable Packaging / Returnity

March 05, 2023 Cory Connors Season 3 Episode 182
Sustainable Packaging
CEO Mike Newman / How to be successful with Reusable Packaging / Returnity
Show Notes Transcript

https://www.returnity.co/

How can reusable packaging actually work? 
How can reusable packaging lead the sustainable future? 
What is working today in returnable packaging? 

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Cory Connors:

Welcome to Sustainable Packaging with Cory Connors. Today's guest is Mr. Mike Newman, c e o of Returnity . How are you, Mike?

Mike Newman:

I'm doing great. Thanks for having me.

Cory Connors:

Thanks for being on. I'm a big fan of your company and what you do. I'm excited to hear about your background. Can you tell us a little bit about how you got into sustainable packaging?

Mike Newman:

Yes, I, I, you know, I didn't didn't know I was gonna be getting into sustainable packaging as I suspect is true for many who are in the field. I started more on the advocacy side. I actually spent five years in DC working predominantly for the Sierra Club, the big environmental mm-hmm., grassroots organization. And after five years it kind of seeing us getting our butts kicked by big corporations on Capitol Hill. I decided to, Play from the other side. I went and got an m mba and I've been working on sustainability from the sort of for-profit side of the equation since then most significantly I spent eight years at a company that was called Re Cellular, which was servicing the wireless industry to facilitate the reuse and recycling of used cell phones. And so running these collection programs, donation programs, cycling programs for, for everyone from at and t to Best Buy, Walmart.. So that was eight years where I really learned kind of a lot about logistics, consumer behavior used products consumer behavior around used products. And and that turned out to be like a really fertile training ground for packaging where a lot of the same kind of dynamics hold true.

Cory Connors:

And that is such a key point , to discuss is the government. . And the reason why it's such a challenge to convince the government that we need to be more sustainable is they're being convinced by the other side , that doesn't think we need to be more sustainable with packaging. And you, you're exactly right. This is the push in the poll of, of what we're talking about here. I think more and more they're, they're getting on our side here and seeing that it's necessary and important and valuable for companies and large corporations in particular, to be more sustainable with packaging. Would, would you agree that it's it's going our way?

Mike Newman:

Well, yeah, there's definitely no shortage of attention. Sometimes for the better, sometimes maybe a little bit Ill-advised. But , I think that it's definitely part of the conversation and, and it's, you know, regulators, corporate leaders, everybody you know, everybody is human and also consumers. They're also drowning in cardboard, , and, and packaging. You know, it's not like, This is, this is particularly activist only visibility. Yeah. So, yeah, I think it's for sure it, it, packaging is having its moment. Mm-hmm. What we do at that moment is the big question. But you know, it's, I'd rather be in the conversation than not.

Cory Connors:

Very true. One of my first viral videos on TikTok was, Hey, if, if Amazon would take your old boxes back, would you put 'em on your front porch? And. Almost a million views later. People were resounding. Yes, please take them back. Amazon, we'll give them to you for free , but we just don't want them in our, in our recycle bins. They're taking up too much space, so, yeah. Well said. Very good. Very important point. So let's talk about your company Returnity . Can you tell us.. Mike Newman: Yeah, we, you know, reasonable shopping bag business over seven, eight years ago. Mostly making kind of giveaway bags for corporations to use at shows and things like that happened to have as a customer. Thread up when before Thread up was really thread up. And James Reinhardt, the founder and co-founder and c e o. Asked us if we could make him a reasonable shipping bag. So kind of went in the lab, figured out a bag. He liked it. He was the first investor. And that investor group spun it out about five years ago to focus on shipping and delivery packaging exclusively. That's when I came in as c e o. And so we've kind of been at it as a sole focus for the last five years. You know, I think the thing we learned through this journey is, Particularly in the secondary packaging world, but, but really sort of across the board, it's, it's less a product challenge than it is a systems challenge. Yeah. So we're really proud of. Our innovations in reusable packaging and how we design and produce them. But none of that matters unless they're actually reused , it doesn't. Right. So, so our evolution has been to keep innovating on the packaging development side, but more and more of our time over that five years has gone towards helping clients understand the when, where, how for circularity. How to keep them in circulation at a very high level. Why that, you know, what, what it takes for that to occur and what the economics are around it, and, you know, and ultimately we just think sustainability can't be subsidized is, or else it won't scale, so, right. It's been all right, we've got really good packaging we can design now let's help clients understand where. Unit economic sense. Mm-hmm. and deployed in that way is a way to build a successful company and, and then also of course have impact, which is what, which is, you know, very important to us. Great points. And how, how many uses does your product need? Have you done the, the lifecycle analysis to where it it is cost neutral or, or cost advantage?

Mike Newman:

Yeah. I mean, you know, we we ultimately got frustrated a year or two ago because we kept seeing all these. All these claims by in the reuse community that would say, well, our packaging can be used for X uses and fill in the blank. I've seen 20, I've seen 50, I've seen a thousand. Mm-hmm., there's a, there's a reuse company out there claiming that packaging can be used a thousand times. And I thought, well, in what world? Like, what, what does that mean from a return rate? Like what world, what is you, what do you actually have to see in participation to then get that number of cycles? Assuming the thing actually is durable enough to last, how long? Right. And, and the math is challenging. I mean, you know, like if you get a 75% return rate, which seems great. Yeah, that's a lot. Yeah. You're only getting four use cycles though, because every time you send it out, a quarter of them are lost. And the math is the math. So, To get to, you know, I think the life cycle assessments have said seven 10. You're definitely crossing a threshold and shipping and delivery packaging. We really target 20 uses, 20 use cycles is sort of our baseline. So that there's really no question that it, it's gonna be the right choice environmentally, and that's a 95% or better return rate. So, wow. And yeah. And so like you really have to keep them in circulation at a very high level in this, in this setting. So that's where the sustainability numbers really fall. And then from an economic standpoint, At the end of the day, it's all about return logistics cost. Mm-hmm., there's just no economic competitiveness if you're paying to ship an empty package back empty, you know, one at a time, even if it collapses flat and really small on everything. Yeah. You know, the, the rule of thumb that we always tell clients is, whatever you're paying for single use packaging, the baseline target should be, can I get my reusables back? and ready to use again for the equivalent expense. So if I'm paying a buck for cardboard, I need to be able to get it back for a dollar a lesson ready to use again. Hmm. There's other economic savings and implications for sure. And, and obviously goodwill and sustainability targets and things like that play a role, but. CFOs don't wanna subsidize this stuff, and there's not really margin in the, in companies to pay for it. So that's kind of the baseline is I gotta get it back basically for what I'm paying for the single use to be, to be economically competitive.

Cory Connors:

Very interesting. And, and let's go back a little bit. So what your, your company provides is a reusable basically like a mailer bag, kind of a pouch system. Is that.

Mike Newman:

Well, we've kind of done everything at this point. You know, I'd say our, our highest volume shipping now is actually in the reasonable boxes that we, we Oh, really?

Cory Connors:

Yeah. Corrugate, like plastic corrugated.

Mike Newman:

Yeah. That like, they're made out of plastic corrugate and fabric. They, you know, pla Happy Returns is our, that PayPal bought is our biggest user that we a bunch of other companies now for that kind of store warehouse logistics leg. Turns out to be a really natural fit for, for reuse, you know, com. You know, a lot of companies are used to seeing the sort of rigid plastic totes that they'll use Yeah. That they palletize. We sort of extended that model into, into the cor good and direct shipping category now. But we've done everything from wine to apparel to, you know, to a lot of, a lot of apparel, you know, all the rental companies I commit the runway and castle and others. Mm-hmm., who we, we've developed their shipping bags for. So yeah, it sort of runs the gamut on product.

Cory Connors:

I've heard amazing things about Happy returns. I wanna talk to, to you about that for a little bit, if you don't mind. Yeah. So can, can you explain to our listeners and viewers how does Happy Returns work? Because I think it's brilliant. Yeah. You

Mike Newman:

know, they they've basically enabled consumers to have the in-store return experie. As far as the convenience of it, not having to package it, not having to print labels, not have to, to stay in line, you know, lines at the UPS store or whatever. And the speed of getting their their credit back to their credit card, and they, right. Yes. Well, you know, and like the, with, that's a big deal online now. It is a big deal. And, and so you can just go to one of, I mean, they have thousands of, of locations around the US now, Ulta Beauty stores, FedEx locations, and world Cost Plus, et cetera. And you just basically hand the products to the, at the cashier and they scan a code on your phone and you're done. Then they throw it in boxes that we make for happy returns that are behind the counter and that's all shipped to their distribution centers where it's sorted and returned to the retailer itself. And it makes it cheaper for the retailers too. So it's easier for the consumer. It's lower cost, it's less impact cuz things are done in bulk. And and it's sort of a win-win, win all around that. Incredible. And they're growing like crazy. I mean, you know, because it just makes.

Cory Connors:

I absolutely love it. And, and it essentially you're eliminating packaging from the consumer perspective on a return shipment, no longer are we required to keep all of our packaging for a week or two. two. To just just in case I wanna return that one thing that I bought from that one site you know, we don't have to keep our boxes or our pouches or oth or buy new ones or find new ones and you know, keep a roll of tape on hand. You don't have to do that anymore. My wife went to FedEx the other day , to use happy returns, and she thought, this is amazing. And even the FedEx person said, wow, we love happy returns. What? What a great concept. It's so easy for us. We don't have to hack anything up. We just put it in , the re eternity box and we're done. Yeah. I

Mike Newman:

don't know why it's so easy hasn't become their tagline, cuz I just feel like anytime I talk to anybody, and like you said, I mean, it's not just consumers who are saying that it's, it's everybody , in that in that process who, who agree. And it's also I think, indicative of how things are evolving , from a, an e-commerce and just commerce infrastructure, right? Yes. So like five years ago, the idea of I'm gonna drive to a place and go to a, that's not the store I bought it from. And like, like, That would've felt like you had landed on Mars Now we're just like, oh yeah, of course. So, you know, like there's lockers, there's ship to store. There's like, we've become so accustomed that it enables these new approaches and consumers are just comfortable with it. They'll just, they'll, they're, they're happy to do it cuz it's, it's proven to be easier for them.

Cory Connors:

Very important point of topic, I think is. The society has changed. Consumers are willing to accept that if they hand something to someone at a store, at a FedEx or at, you know, another location, that it will actually get returned and the, they're gonna get their money back immediately, which is pretty awesome. Let's talk about how you how your company. Helps with the return process. Do you, inside the pouch that gets shipped, provide some kind of a a return label? Does it go back to you or does it go back to the retailer? How does that work?

Mike Newman:

Yeah. You know, we really don't get in the middle. Okay. Because we don't think we add value there, you know, and I think that that's still fairly unique in the reusable packaging world. I think most of the companies who, who have sprung up to try and service this have it be packaging goes the retailer, retailer packs goods, well even, you know, primary or secondary. Products get to the consumer. Consumer uses them. They return it to the packaging company for cleaning and repositioning, and then the packaging company. And so there's this sort of three legs. Yeah. But we feel like that adds time. It adds cost. And it's not really value add. And so what we do is we design it so we don't need to be in the middle. And we, you know, our clients I think just benefit from that. And so it's less control for us. But the point is that, like we were talking about earlier, if it doesn't scale from an economics and operations standpoint because it's too expensive or complicated, how am I winning as a provider? So we just think simple is better, you know, we're replacing. I say with, with genuine affection about poly bags and cardboard is that they're dumb, cheap and easy. Like that's why they've done so well. They're dumb, they're cheap, and they're easy and like love that. We feel like by being as dumb and cheap and easy as possible in reuse, we open up more opportunities rather than this like closed in, integrated data and tracking. And third it's too hard for mo too many people we.

Cory Connors:

Yeah, well said. Dumb, cheap and easy. Makes that, that could be a, your tagline, right?. I love that. I think it's important to realize that consumers don't demand, but really appreciate that it's easy and Simple and obvious. I would say read a poll or I posted about this morning on LinkedIn about how oh, more than 60% of consumers will buy an item. If it based on the fact that it's packaged sustainably, meaning they prefer sustainable packaging, so they will reach out, they will, they will search out sustainably packaged items, which I think is a real selling point for your customers.

Mike Newman:

Well, it's some, I mean, it's certainly something they have to pay very close attention to. And and they're very well aware. I mean, you know, we, we, the list of retailers who have made these 20, 25 pledges about their packaging is pretty remarkable. It's sort of everybody, you know, every brand and retailer you can think of at this point. I think the gap between the pledge and the execution is still quite wide. But, You know, like we touched on earlier, you know, if you got boxes piling up on your doorstep and, and overwhelming your recycling bin not. That's not just a true believer awareness, that's a general consumer awareness. And and it feels wasteful. Mm-hmm. And that is mm-hmm. That's an important dynamic to understand. Now, I think the gap between the feeling that consumers are expressing and the execution as it relates to reuse is still quite wide. And something that I think, that I think has been hard for. For companies to navigate, but the trend lines and the dynamic there is, is significant, no doubt.

Cory Connors:

Absolutely. And it seems that people, like you said in the, towards the beginning of this show was that people are getting used to it. They're, they're getting They're ready to adapt to this new concept and you know, used to be crazy to bring your, your reusable grocery bags to the grocery store. Now it's it's crazy not to cuz it costs you 50 cents every time, you know? So people are, it's more commonplace, it's more accepted, it's more the norm. And I. As we continue down this path your companies like yours will be more and more successful.

Mike Newman:

Yeah. I, I think that, that, well, I'm hopeful that's true, . I, I do, I do think it is worth sort of, Calling out though that there is this still this big gap. I mean, you know, 75% as I spoke to earlier for a reuse rate feel, you know, in what other context could you say we have 75% of consumers taking a pro pro environmental action. Yeah. Voluntarily or, you know, maybe with some incentive tied to it. Sure. You know, that's a remarkable accomplishment except, and in reuse, it's frankly not even close. Like you have to . It's a fail. Yeah, it's a fail because these are more expensive. They're more environmentally, you know, I say reusables are worse for the planet until they're not. Right. I mean, like, that's the mentality that we have to have. Like, you have to use them enough or else you are not creating a net, a net gain from an impact standpoint. So I think that the challenge here is like how do you leverage that ins that motivation and awareness in a way that is true to the problem that we're addressing today. So we wanna realize that that potential, but we need to do it in a way that's honest and open, and 75% is not honest and open. I mean, that is not success today. So the question then becomes, well, do we. Doing it in that way and anticipate hope that over the coming months or years, the, the rates are gonna go up and up and up and we've sort of crossed them some threshold or do we not, and how do we, how do we be honest about that? Because, you know, our view as a company has been that the reuse industry, if I, if we're gonna give it that moniker, has kind of tried to. Hush that part up. Yeah. And not really like shine a light on the fact that, you know, today there are very few programs where they're getting that 90 plus percent circulation rate that unquestionably puts it in the positive for the planet category, which is different than like adding in more recycled content or making it more readily recyclable. Those are wins that happen. A, you know, like that happen sort of from the start because Right. You know, anything that changes in that sense is a win. But in reuse, like to justify, you really have to reuse it. And that's that gap is where we're the most vocal because we think that that's just necessary to be able to scale with credibility.

Cory Connors:

Thank you for your honesty, and thank you for shining that light on that part of the industry because it is important and critical to the cause. Are you finding that some of your customers are able to leverage the reusable packaging to create more loyal end users?

Mike Newman:

I think the short answer. Somewhat. So I think it's getting there. You know, I think what I think the way that it has been most useful is, is when retailers and brands are building native programs around the packaging. I think where it's been the least successful is when they sort of added as an opt-in at checkout kind of fork and the road approach. Hmm. And so, and the reason for that, I think ultimately is that , trying to change consumer behavior. That's extremely difficult, right? Yeah. And, and I think an opt-in at checkout approach ultimately sort of plays out as a, a bit of a like a virtue signaling kind of mm-hmm.. Activity on behalf of the consumer. It's not very deep and it's not very wide. It's sort of like, oh, I can pay a couple bucks extra maybe, or, sure. I'll take in the reasonable. That seems like it makes me an environmental hero today, . It doesn't necessarily result in enough of the, as we were talking about earlier, the follow on behavior, which is what you have to have. Whereas if you're building native solutions around circularity and reuse, where you're really attracting consumers who are seeking out that kinda. Product or service and being really diligent about that. I think that's where, where retailers are doing best with, with re reuses.

Cory Connors:

well said. And, and it's important to understand that , if the company gives the consumer that choice and the consumer says no, then, then the company's just like, oh, well we tried, you know? And whereas I feel. Either you, you're in it or you're not. And, and I think they should either commit to it or say, no, that's not what we're gonna do. Have you seen, have you had any customers that are providing some kind of an incentive to, to return the, the packaging maybe in a bulk setting. Like, Hey, bring back five of these and we'll give you you know, you know, three bucks off your next purchase. Is that, is that.

Mike Newman:

It, it is. You know, I think that there, there's there's a variety of, of programs that are trying that. I, I don't think it's been that successful, frankly, in the shipping space. Because I think it helps, but it only helps a bit. It sort of like, the way I I sort of describe it is, The retailers in generally have been most interested in switching to Reasonables for standard e-commerce, which is understandable because it's like where they spend the most on packaging. It's the most visible part of their supply chain. It's where they're getting beat up the most Re regulators tend the most focused on it, like it makes sense, but what we tell 'em is like, well, all right, well now you're trying to solve your hardest problem. Rather than your easiest, and you know, the easiest are the sort of applications where you already have some level of circularity or high level of engagement. Mm-hmm.. And the problem is then when they try and solve the mo, the least circular is that they're finding Yeah. They don't get it back often enough. They do incentives and it, and it moves the, the needle a bit, but not enough to get it to that return rate. and then, then they abandon it. And so it sort of sets the, the field back across the board. So I think incentives need to be the icing, not the cake. And the cake better be pretty darn good, is our, is our point , like you better have a pretty good return. Like you should be close or already at that level of circular engagement. And then you can tweak with like incentives and education and infrastructure, all the things that we're used to talking about in this. To just like optimize. Yeah. But generally those things aren't gonna be enough to take a low return rate program and somehow magically get it to be viable. Yeah.

Cory Connors:

Yeah. Really important points, and thank you so much, Mike. This has been awesome. Do you have any advice for people that are considering reuse? Is there a, is there a atypical customer that you'd like to reach out to from this? Well,

Mike Newman:

I think that, yeah, I think that that the things that are most important are when you have employee-driven logistics. Those are great applications for reuse because employees can be trained and held accountable in ways that consumers are, are understandably not as aligned to. I think high frequency, high engagement, you know, that is where we're all seeing the most success. And so somebody going to a website and buying a pair of jeans once a year is a very difficult customer to convert. Yeah. And a very difficult logistic system to convert, to reuse. But if you have high engagement and you have high frequency, Now you're getting people aligned and consistently engaged on a certain behavior. That to me is where we should be putting our energy. It's certainly where we are. It's a company you know, whether it's grocery or apparel rental or, you know, store to distribution logistics. Like that's where our emphasis has been and that's, you know, been really successful for us. and I think that's what I would challenge brands and retailers who are thinking about this challenge is like, where do you have the most control and circularity already build from that, even if it's not where your C F O or I mean where your head of sustainability or c e O had said, we wanna start. Yeah.

Cory Connors:

Yeah. Well said. And I'm excited to see this trend move forward. Thanks again, Mike. Really appreciate that. Thank you so much for

Mike Newman:

having

Cory Connors:

me. Yeah, thank you Landsberg Orora for sponsoring this podcast. If you're listening, make sure you subscribe so you don't miss the next episode. And we appreciate it so much. Thank you