UPS Earnings Release Part 2: Will the Acquisition Produce Many Happy Returns?

PayPal's missteps over the past decade are legend.

The new CEO Alex Chriss comes from a long history at Intuit, steeped in the SMB and partner ecosystems, and wasted no times in taking care of a previous misstep - the company's acquisition of Happy Returns.

Sounds like a quick 2 month about face (new CEO started just 2 months ago) on a 2 year mistake. To me, this decision bodes well for the direction of PayPal.

It was always extremely curious how a payments company hoped to monetize one of the most difficult supply chain exercises any organization can tackle -- inspection, disposition, and reverse logistics.

PayPal at the time said they were looking at monetizing the entire post-purchase experience -- a complete departure for the company -- luckily, for them, it was a relatively minor departure in the grand scheme of things. Post-purchase combines retention marketing, customer service, software, and logistics. Did you see me mention payments in there?

Firms like Returnly tried to make returns a fintech business rather than a customer experience business, and we see what happened there. I think PayPal's thinking was originally in this vein.

It's ironic that two payments-oriented companies: Shopify (just look at their revenue streams) and Paypal, both dipped their toe into logistics, and both retreated relatively quickly (Happy Returns was acquired by PayPal only 2 years ago -- quite an admission of ill fit).

The new UPS acquisition should have a better result. I agree with UPS CEO when she states that it's a win for everyone:

* Consumer experience: no box, no label returns. Win.

* Locations: UPS doubles the Happy Returns bar network. Win.

* Density: More parcels shipping out of the store = filling trucks fuller. Win.

So, better for customers, more profitable for UPS, and broader reach? Sounds like UPS could take even more share in returns.

A few things to note:

* The size/volume of UPS relative to FedEx, and the number of physical locations, give you some idea why UPS was able to outbid FedEx for the asset.

* This is an area I think Amazon needs to worry about. The Amazon returns experience is one area that has been degraded in the last 2 years. Perhaps the Amazonians will treat this as a wake-up call.

While UPS has a great experience, and they accept Amazon returns, it's expensive, at least relative to what consumers have been used to.

And Amazon still has no physical store strategy of note. (Tick tock).