Dive Brief:

• Ikea will employ logistics startup Optoro's technology to improve its returns management and reverse logistics processes, the retailer announced last week along with an investment in the company's latest funding round. The pilot will encompass 10 Ikea distribution centers, 50 retail stores and its customer support center in the U.S., with the potential to expand to other markets in the future.
• Optoro's platform uses data analytics and machine-learning algorithms to route returned and excess inventory to optimal locations within an enterprise's network. The company can also create an end-to-end view of reverse-logistics processes.​
• "We’re on a mission to become a circular business by 2030," Javier Quiñones, president and chief sustainability officer of Ikea Retail U.S., said in a statement. "Optoro’s solution will enable us to eliminate much of the waste created in the reverse supply chain, from minimizing the carbon emissions released in return shipping to finding the best next homes for returned items."

Dive Insight:

Ikea anticipates the use of data analytics in its returns process will reduce the volume of products sent to landfills, according to the release. 

"Retailers using [Optoro's] Returns Optimization Platforms are able to divert over 99% of returned product to landfill, eliminate waste by up to 70% and reduce emissions by 51%," Optoro claims in a sustainability white paper.

Diverting sellable merchandise from landfills and back into retail destinations is not only a more sustainable option, but it can also serve retailers' bottom line. A study from Arris Retail estimates over $369 billion worth of sales were lost in 2018, due to returns, which can also increase out of stocks and costs from redistributing and merchandising inventory. 

The value of Ikea's investment in Optoro's latest funding round was not disclosed. The retailer has made investments in a variety of alternative energy and recycling companies as it works to go "off-grid" and reduce waste.

As Ikea pilots Optoro's returns optimization solutions, the retailer has also been working on making its logistics operations more sustainable. In a letter to employees regarding the company's support for Paris Climate Agreement, Quiñones said Ikea plans to make home deliveries in New York and Los Angeles 100% electric by 2020. Ikea already operates fully electric last-mile deliveries in Shanghai, and has goals to expand the program to Amsterdam and Paris by 2020.