United Parcel Services Inc. UPS recently announced that it has entered into a strategic alliance with Optoro. This deal is expected to provide retailers and manufacturers with a one-stop shop solution to help optimize transportation and disposition of excess inventory and returns. Collectively, the joint reverse logistics solutions of the two companies are expected to maximize recovery value and aid in reduction of environmental waste.
Interestingly, United Parcel’s UPS Strategic Enterprise Fund had also recently invested in Optoro. Both companies are committed to ensuring that the impact of returns on the environment is minimized.
Optoro’s Business Model
Optoro was established in 2010 with the goal of assisting retailers and manufactures manage, process and sell excess inventory and returns. The technology company’s software platform selected the best means for the same. The company determines the optimal path through its holistic data analytics and multi-channel online marketing. The company’s model ensures minimal environmental waste. The company’s innovative business model leverages on technology to sell excess inventory on digital marketplaces like Amazon.com Inc. AMZN website, eBay and the Optoro’s retail websites BLINQ.com and BULQ.com.
Need for Returns Platform
Customer returns and excess inventory is one of the major challenges faced by retailers and manufacturers. Per Tobin Moore, CEO and co-founder of Optoro, the customer returns industry garners $260 billion annually in the U.S. alone. Hence, providing such a platform is expected to significantly benefit retailers.
The weeks following the holiday season are very busy for companies like United Parcel, Air transport Services Group Inc. ATSG and FedEx Corporation FDX.United Parcel has strategically timed its new alliance in line with the company’s National Returns day and post-holiday returns week. The company expects Jan 5, 2017 to be the busiest day in terms of returns. In fact, the company estimates returns of over 1.3 million packages. In the first week of January alone, over 5.8 million packages are likely to be returned. Thus, we expect this model to significantly benefit the value chain.
United Parcel carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. We note that United Parcel’s stock has underperformed the broader Zacks categorized Transportation-Air Freight industry over the past three months. The company gained 6.31%, while the industry gained 10.35% over the same period.
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