Welcome Revive to the Equal Family!
Turning returns (and deadstock) into revenue
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While some investors have been hesitant to touch the back-end of the retail industry (choosing to focus on more front-end experiences like consumer apps and headless commerce), reverse logistics has arguably become the largest unaddressed opportunity in the commerce landscape. Per the National Retail Federal, ~$820B of merchandise was returned across both in-store and digital channels in 2022, which had more than doubled since 2019 (within digital channels, returns have 5x-ed). While forward logistics operations have been optimized ad nauseam to fulfill with speed and efficiency, reverse logistics (the processing, routing and handling of returns) remains untouched, creating an immense economic drag on the retail ecosystem.
Apparel is one of the worst offenders as almost 50% of U.S. consumers have returned a piece of apparel within the last 12 months and per our analysis in the Point of No Returns blog post, almost $100B of GMV in apparel alone were returned in 2022. As brands relaxed return policies over the last few years, this has led to an explosion in returns with the vast majority of product being stranded in warehouses eroding in value.
While there are physical components to this process, this is fundamentally a data issue. Multi-brand retailers are unable to grade, assess, and redirect in-person returns across a large number of brands (e.g., Bloomingdales will not and cannot evaluate returns across all the brands they carry). While single brand retailers have a more limited SKU set, they generally lack the scale or logistics sophistication to even attempt to tackle returns. Within digital channels, 3PLs (who are responsible for the forward fulfillment of ecommerce sales) have their assets and operations optimized for forward logistics (rather than returns) leading to the vast majority of 3PLs losing money on returns. Even off-price players (like TJ Maxx) are hesitant to touch returned inventory, given the limited transparency into the quality and consistency.
As part of our Prepared Mind Deep Dive process, we have spent the last few quarters searching for the right team to partner with to tackle this market opportunity (thesis deck here), knowing that this challenge would require a unique blend of retail, operations and data prowess. We fully recognized that this would be an incredibly difficult company to build, but whoever could pull it off, would have the chance to redefine the retail landscape in a major way.
Enter Allison Lee and Revive, formerly known as Hemster. Hemster launched in 2017 as an alteration-as-a-service platform for brands and while the initial model did gain early traction with brands such as Reformation and Madewell, COVID lockdowns turned the business off overnight given the in-person component of the original model. While Allison attempted valiantly to recover the business, in a post-COVID retail world, offering alterations to consumers fell low on the list of brands / retailers’ priorities. They had to pivot to what brands / retailers were telling them were their biggest pain points and in 2022, that was returned and damaged inventory. The early seeds of “Revive” were sown.
Allison started conducting pilots through 2023 where brands sent Hemster a small selection of their returned / damaged inventory. Hemster would then evaluate the inventory, decide whether it’s economically profitable to refurbish the inventory, and then depending on the quality of the inventory (Grade A vs. B vs. C…), route it to the best path, either back to brands or to other disposition paths including eBay, Poshmark, Thredup, and more. In short, Hemster was starting to unlock the ability for brands to “optimize” previously dead inventory. This new offering was called “Revive,” and the Hemster team started focusing all their resources on this new solution, which was seeing much stronger market pull than the legacy alterations solution. Allison also added Rafael Hines as the COO in 2023, who led the acquisition of PlumRiver by ElasticSuite and honed his retail chops at Barney’s, Michael Kors, Coach, and Ralph Lauren.
In October of last year, we were connected to Allison via a prominent commerce / supply chain founder who was also a Hemster advisor to discuss a potential partnership with another Equal portfolio company. We were immediately struck by how closely the new direction of the company matched our thesis and the potential fit with the Equal Retail Keiretsu. We put her in touch with numerous experts within the Equal retail ecosystem — all potential partners for Hemster and all of whom gave us incredibly positive feedback on Allison and the new model.
We believe we’ve found a special person in Allison. She started Hemster seven years ago and has single-handedly kept the business alive through significant turmoil as a solo founder. She grew the original business to $200k in monthly revenue which went to zero overnight given COVID, “followed the market,” pivoted the business to something much more exciting, and recruited a strong COO to join her. As we outlined in our Phoenix Round post, Allison exemplifies the type of founders we are searching to back in these situations — someone with grit and unique, earned insights.
We are thrilled to lead a $3.5M round into Revive along with Hustle Fund with participation from new investors such as Banter, Coalition Operators, Mute Ventures, and existing investors including Charge VC and Everywhere Ventures. Since the beginning of this year, Revive has turned on evergreen contracts with major retailers and revenues are up more than 15x, further validating the criticality of this problem for major brands.
We are excited to join Allison and the rest of the Revive team on their journey to turn returns (and deadstock) into revenue!
