How Peer-to-peer Returns Help You Dramatically Reduce Shipping Costs — Manish Chowdhary | How AI Ensures Smooth Product Returns, Why Apparel Brands Win With Fewer Returns, Better Cash Flow For DTC Brands, Why Peer-to-peer Returns Cut Costs By 64% (#362)

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In this episode of the Ecommerce Coffee Break, host Claus Lauter welcomes Manish Chowdhary, Founder and CEO of Cahoot.ai, the world’s first peer-to-peer order fulfillment network. 

Manish shares insights on an innovative approach to returns that saves brands money, reduces environmental impact, and improves customer satisfaction. Learn how this groundbreaking solution is reshaping eCommerce logistics and profitability.

Topics discussed in this episode: 

• Why peer-to-peer returns slash shipping costs by 64%. 
• How bypassing warehouses accelerates return processing by 4x. 
• What apparel brands gain with reduced return rates and faster restocking. 
• Why eco-conscious customers prefer brands with reduced carbon emissions. 
• How AI verifies product conditions for seamless peer-to-peer returns. 
• What real-time inventory updates mean for "like new" products. 
• Why cashback incentives boost buyer and seller satisfaction. 
• How peer-to-peer returns improve cash flow for DTC brands. 
• What industries benefit most from this return model beyond apparel. 
• Why this innovation is a game-changer for profitability in 2025. 
• How early adopters get special pricing and waived fees ($1M+ GMV) 
  
  

Links & Resources

Website: https://www.cahoot.ai/
Shopify App Store: https://pages.cahoot.ai/cahoot-peer-to-peer-returns/
LinkedIn: https://www.linkedin.com/in/manish-chowdhary/

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Transcript

Hey there, welcome to the eCommerce Coffee Break. I'm your host Claus Lauter and you're listening to the podcast that helps you become a smarter online seller. In today's episode, we discuss how peer to peer returns help you dramatically reduce shipping costs. Joining me on the show is Manish Chowdhary, Founder and CEO of Cahoot.ai.

ai. So let's dive right into it. Hello, and welcome to another episode of the E-Commerce Coffee Break podcast. They want to talk about peer-to-peer returns and how they help domestically reduce your shipping costs. Now, we have spoken a lot of shipping, but never on returns. And returns is something that obviously a lot of, um, measures have to deal with on a daily basis, and we want to dive really deep into this.

Joining me today on the show is Manish Chowdhary. He's the founder and CEO of Cahoot. Ai. The world's first peer to peer order fulfillment network. He's a serial entrepreneur who started his journey from his dorm room at the University of Bridgeport. Manish specializes in e commerce strategy, supply chain optimization, and business innovation.

He holds 10 U. S. patents and an honorary doctorate from his alma mater. So let's welcome him to the show. Hi Manish, how are you today? 

Well, thank you for having me. I'm doing great. 

Manish, last time you were on the show, we were talking about peer to peer, but not in regards of returns. Now returns is for most merchants out there a big headache, and there's a lot of misconceptions out there.

Tell me a little bit about what's the biggest challenge that merchants have with returns. 

Yes, um, returns are a huge pain point. It is a significant drain on, uh, brands profits. And especially at a time when we are talking about tariffs, profit, profitability for Shopify brands is at record low. And, uh, I'm super excited to share this very innovative but highly profitable solution ever created.

This is unlike anything else, folks. So you want to stick around till the end. 

So let's start with the concept of peer to peer returns. How do they differ from normal returns? 

Yeah. So for those of you who are watching the video piece, uh, uh, the way how returns work right now is Amy in Los Angeles wants to return an item, whether she decides to ship the item, uh, to the brand or whether she drops it off at a local, uh, store or even, you know, at a, uh, post office or what have you, ultimately the item, no matter which item it is, method it is used comes back to the brand, brand's warehouse, which in this case, let's say it's located in Dallas, Texas.

So, uh, the, and the, once the brand receives the box, the package, they open the box, they inspect the items. And if the item is in reasonably good condition, you know, one, they will try to restock the item and all that burden of all of that falls with the brand and, uh, brand also usually pays for shipping the item from Amy to the warehouse.

That's the way how returns work today. And then if the item is good enough, they will restock it on the shelf with the hopes of selling it to another customer. And in many cases, the window to sell the item and recover and recycle this item is very limited. You know, I'm in a New York area, so I'm not buying swimsuits right now.

So that is something that I'm the sweaters. That, uh, are going to be returned in February or February is not going to be purchased after March. So, this is a very, very big problem for not just, um, you know, brands and retailers, especially in the apparel, uh, vertical where the returns can be as high as 30 to 40%.

On average, the return is about 16 to 18 percent in e commerce. So, this is a huge drain in seller profits. 

No, it makes perfect sense. Specifically, you mentioned fashion industry, uh, there's a high turnover, seasons come and go. So everything needs to be quick and if somebody's returning the thing after like 30 days, um, you as a reseller have a problem on hand.

So talk me through the old way and talk me through the peer to peer 

way. Exactly. The old way is, uh, the brands paying for the shipping twice, uh, taking over all the burden themselves, but the new way, the peer to peer way, is going back to the example, remember, Amy is in Los Angeles, she is returning the item, and Sarah is in Wyoming, she is looking to buy the item, if Amy could ship the item directly to Sarah by bypassing the warehouse entirely, This creates incredible value for the brands and it has tons of benefits, which I'm happy to share.

Now, that's an interesting concept. I've never, but I mean, before we started recording, you said that will be a surprise for me. And that's definitely surprising what you just said there. Tell me a little bit about the technology behind that. How do you ensure that the right items do get to the right people?

That's a great question. So before I answer that class, I'd like to go over the, um, the economic benefits, you know, of the solution, because why is it even worth listening? Right? Why should the brand should be paying attention at the edge of their seat and they should stay through for the entire duration of this podcast is this is a real example, real item.

We perform millions and millions of dollars of shipping. So we know a thing or two about shipping. So this is a real. About a pound and a half, one and a half pound item, real jeans, real dimensions, real cost. So Amy, uh, shipping it to the warehouse will cost you 8. is the warehouse processing, restocking and reshipping, uh, fee, uh, to Sarah, which is another 8.

29, uh, altogether the old way will cost you about 23 and the new way, the peer to peer way will cost you 64 percent less. And that is not all. So 64 percent less cost, and 4 times faster. Because the old way, Amy returns the item to the warehouse in Dallas, that takes 3 days, the warehouse, if they've got their act together, most brands and retailers, you know, because they've got so many things going on, they choose to ignore their returns.

They actually look the other way. They actually, Throw out 20 percent of their GMV out the door easy and that money is never to be found, never to be seen and then, you know, the, the warehouse ships it to Sarah, that's another three days, peer to peer can happen in as little as three days, four times faster and we all know that The impact of the environment, every, especially the Gen Zers, you know, they are highly concerned about the environment as we all rightly should.

So every brand is struggling to find a eco conscious environmental friendly solution. You know, just getting the customer to pay for carbon footprint emission to me, frankly, Claus, that is an insult. You know, you're buying carbon credits, you're doing nothing to help the planet. This one, you're actually doing something about it.

And your customers know that. Customers know when you're putting a lipstick on something that is purely fake, whereas this is a real, you're cutting down carbon emission, more than half the carbon emission through the solution. So, this is good for the business, good for the planet, and good for, you know, the bottom line.

Now, I definitely see the advantages of doing this. That brings me back to the, how does it work in real life? Because there's a lot of data going obviously on. Yes. And this is not data that a normal platform like Shopify, like Amazon can deal with. 

Exactly right. So I want to take you through the how, now that we know the incredible benefits of this technology and the solution.

But to recap for the folks that are listening, you know, with this peer to peer returns, proprietary cahoot technology. Uh, it is patented only Kahoot and only Kahoot does this. Uh, so there's nothing else like this on the market. So we are eliminating one leg of the shipping. We are eliminating returns processing entirely at the warehouse.

We are selling these returns faster and we are saving the planet and appealing to eco conscious customers who will now like your brand even better. But now let's get into how we do this, right? So remember, Amy is the one returning the item from LA and Sarah is the one buying the item. So if you look at the product details page, and for those of you are looking, looking at the video, you will see right below the buy button, once Amy processes her return, and if the return is in good condition, you know, we call it like new, because it's We will call it like an open box because it may not have the pristine packaging, but there's nothing wrong with the item.

Remember folks, return is not used item. Return is brand new items that is just, we are bypassing the warehouse. And we are now offering this to Sarah and Sarah has the opportunity to purchase this item directly on the brand website directly on your Shopify product details page for a discount because we are creating so many so much savings that we want to incentivize Sarah to buy this item.

In this particular example, Sarah has the option of buying a brand new item that will be shipped from the merchant warehouse at 60. Or she can buy this item that is like new for 20 percent less and that's not all there's an additional 5 cash back incentive not a store credit not a discount code not a coupon code It is No strings attached Cashback that will be a prepaid, uh, card that will be given to, uh, to both Amy and Sarah.

So this is, uh, savings, uh, is highlighted, uh, returned items are shown in the product details page, and it is completely branded to the merchant's web store. So it does not look foreign. It does not look that it is not part of the organic experience. It does not compromise anything. Any of the branded shopping experience and it's real time.

So the inventory So for example in this particular example as you're looking we only have three items like new available You may have hundreds of items that will ship from the warehouse, but these aren't scarce supply So this will also create additional loyalty for the brand because now the customer has a couple of additional options You know if i'm looking for a deal i'm more likely to check out You You know, the, the, the page and grab that item before it's gone.

That's a very interesting concept because you created a win win situation there. So it's a win for the person who returns, if I get you right, because they get a voucher for the next purchase. So they're motivated to buy more from you, even if they didn't like the first product. This second person, the receiver, gets it cheaper and gets also a benefit out of them.

And then obviously you as an online seller save a ton of work and you still make money or basically you don't lose money on, on the returns. Now, when it comes to this whole cashback scenario from a management side of it. Um, how do I manage this as a, as a merchant in the back end? 

The best part is Claus, I'm so glad you asked that question.

It is fully automated. Kahoot manages all of that. The brand doesn't have to do any of it. So we represent the brand and we communicate directly. We issue those rewards and it all happens automatically. So brand doesn't have to do anything additional. They just install the Kahoot app. Kahoot! You know, we download the data and I'll cover for the, for the merchants who might be interested in the solution, how they can get started with Kahoot, which I'll cover.

But it is, it is very, very simple for the brand and they can get onboarded very easily. It's not a heavy lift at all. 

Okay. Now, is that the pair to pair network is basically the network are your clients. So there is no warehouses. Do you have to do this with all your products or can you pick the products where you want to offer the service and then other products you want to get back to your warehouse for some reasons?

Yeah. Great question. So this is not a all or nothing, you know, so essentially, um, one, you We can pick the items, uh, that may be suitable for peer to peer, uh, and not every item will qualify for peer to peer. Remember, the item has to be in a great condition. So we have, we have a lot of technology that, uh, Uh, Kahoot has implemented.

So there's a returns portal. So a lot of the Shopify merchants are familiar with the return software, which essentially enables a customer to easily process a return. So Kahoot will have, has a similar return portal where the returner, the person, the customer that wants to return the item, will place in their request for return.

And all of that will get processed. The merchant will log into the Kahoot software. Uh, and issue the refund or set up the rules to issue refunds. And then if the item is in, uh, like new condition that, uh, we can verify, uh, through pictures and other sources. Um, only then will that item be listed for Sarah to buy as an open box because we want to ensure that the customer experience is not compromised at any time.

Now I'm curious and you don't need to tell me this sounds so complicated. Is there AI somewhere involved? 

There's 100 percent AI involved, so I'm glad you asked the question. Obviously, one of the big questions that the brands have is, you know, is Amy returning the item as described? Is Amy being truthful?

Is Sarah going to get a bad item, you know, because Amy is not being sincere. And if she's not so obviously we want to believe Amy, but we also want to verify. So we've got all the A. I. Assisted grading that examines pictures to determine if it is indeed in a like new condition. If there's any blemish, if there's any imperfection, Uh, so we can do that at scale.

So there's definitely Kahoot. Our website is also called kahoot. ai. So we are, you know, we implement a lot of great technology to bend the curve. So this is something, this is probably the most innovative and most profitable solution any Shopify brand can implement and take advantage of it in 2025.

Especially with the tariffs coming down, profitability is at record low. It is very, very hard for brands to improve profitability. Cost of ads are going up. So the one thing you can do is, remember, it's not just the Visavion returns, half, if, if you have, let's say 20 percent return rate. At any given time, 20 percent of your GMV, your, your asset is in, in cyberspace.

Basically, it is floating. You can't sell the item till you receive the item. Whereas this one, you can sell the item even before Amy has completed, you know, the shipping process. So, there's nothing better than that, that you're now, you know, selling the item before it's returned. In fact, you're collecting the money from Sarah before you're refunding the money to Amy.

There's nothing better than that. You actually have more money than less money. 

No, it's true. A lot of DTC business out there are completely cash driven. And so if you get your cash flow optimized, that definitely helps. You mentioned before that the apparel fashion industry is one of the target groups.

Are there other industries where this would work very well? 

We believe that over time, this is going to be the new standard for returns, uh, class because the, uh, days of free returns, no questions asked are coming to an end. You know, uh, you know, just by way of example, if I buy a paperclip in store and I go home and I don't like the paperclip and I want to get my refund, I cannot call the store and say, hey, I don't like the item.

Uh, they are not going to give me my 99 cents by just making a phone call. So why is that happening in e commerce? It makes zero sense. So all of that you're going to see, uh, that this is the best time. So to your answering your question, this is applicable to almost everything except, you know, where you have food and hygiene, pharmaceutical.

Those are the, uh, the item that, uh, for safety reasons, for hygiene reasons, we cannot accept. Furniture, home decor, you know, uh, tools, automobile, auto parts, anything, uh, apparel is a huge vertical, you know, accessories, uh, footwear. I mean, you name it, apparel and accessories have the highest rate of return.

So those folks are going to get the maximum benefit because imagine 40 percent return rate for women's apparel in many cases. That is astounding. And frankly, and if you're giving 50, you know, no questions asked, you're paying for all the returns. I mean, imagine how much your profitability is likely to go up if that 40 percent did not just vanish.

Yeah. And I want to come back on the advantages for the seller and the new buyer is that you not only get a voucher, but you also sort of build up your brands and you give it to someone else. They get it cheaper and people are very conscious on what they spend right now in an economical situation that we're in.

So I think it's, it's a really a win win situation for everyone. Um, Can you give me an example on a brand or a client of yours, um, what kind of KPIs, what kind of results they see? 

Yeah. So this is an example. Like if you were to use a traditional return solution, which all the current solutions on the market class, all they do is they make returns faster.

You know, that means it's great for the customer, but horrible for the brand. Yes, they are basically not investing as much time. So there's a dichotomy. There's a problem, right? If the brand makes it harder for the customer to return, The customer has a bad experience, so the brands have chosen to implement software that just makes it cheaper, fast, or it just makes it faster for customers to return, which means the money is flowing out the door even faster.

It does not help the brand, you know, whereas in this case in Kahoot, as you can see in this very simplistic example, even after cashback, the brands Uh, you know, are going to recover a lot more and this is an example of an apparel brand. So we are, you know, working closely with a select group of merchants that, uh, you know, are looking to bend the curve that are, that want to be progressive, that want to be innovative.

And, you know, uh, this is, this is obviously, you know, a newer solution. So we are, we're going to examine, uh, the merchant data, you know, and determine whether they will be the right fit for us. And we can also predict what kind of ROI, what kind of benefit, economic benefit they are going to receive. So the folks that want to, you know, um, get on the ground floor of this because they will have some unique benefits with Kahoot because of the preferred pricing.

And if they choose to continue with Kahoot, we will, you know, obviously honor that. As the early adopter pricing. So essentially what I would encourage your folks to do is, um, you know, I will send you a URL that you can post. Uh, people can go fill out their form. Uh, these are the Shopify merchants, and we can examine their data.

Everything stays confidential, and then if they are, uh, satisfied, and they would like to take advantage of this, uh, special offer that we have, you know, the window of that is going to be short, so I would encourage as many, Shopify merchants that have at least a million in GMV. So they must have at least 1 million in gross merchandise value, uh, for us to work with them at this stage.

And we will obviously make this more widely available in the future. So this is a very, they can start their 2025 on the right foot. They can recapture some of the revenue, improve profitability. And, uh, this could be a win win. 

No, absolutely. I want to take one step back. Uh, can you walk me through the onboarding process?

What kind of steps are involved? And how long does it take you to get the Merkle Hub running? 

The onboarding process is, uh, essentially you install the Kahoot! app. And then, you know, Kahoot! will contact you. Um, to just, uh, implement some of the styling and we have a guide that walks the user through some of the setup process, you know, depending on the size of the product catalog, it is, there's not much, there's not a ton of heavy lifting for the brand to do and then essentially a little bit of training that my team will provide.

So it is intended to be a, um, low effort, high reward. And we will, my team will be working very closely with these folks to ensure that they are successful and it is working for them. 

Okay. Oh, one question I need to ask. How do you earn money? What's your pricing structure behind that? 

Yeah, so as I shared with you, uh, class that right now, uh, we are, um, making this available on a limited time basis to some of the early adopters.

So there is no long term agreement there. We will be waiving, um, even the subscription fee for something like this because this is so revolutionary and it can put hundreds of thousands of dollars back in the brand's pocket. So typically the solution, uh, would be priced at a thousand dollars per month, but.

We will waive that for the early adopters. So there will be no commitment, and we will only charge a small transaction fee per unit, which is a success fee. Uh, so it's a very low barrier to entry, but we are looking for the right partners, um, who we can bring on in the, uh, early adopter program. 

Okay. For our listeners who are listening to the audio version, there is a video version with a presentation where you can dive a little bit deeper into and see some numbers in front of you.

And I think it's a, it's an awesome solution. I've never heard of it and managed to deliver it on your promise to surprise me. Um, a great solution. Before we come to the end of our coffee break today, is there anything that you want to share with our listeners that we haven't covered yet? 

Uh, nothing more.

I think I will include, uh, I'll send you the URL that you can include for the folks that want to express interest. So they should just go out and fill out the form. And I know that the listeners, depending on when this podcast goes live, you know, this would, this could be the best thing they can do, uh, for 2025.

So, you know, don't be afraid of technology. You know, I think changes here, you know, before the tariffs start hitting your bottom line, you need to find other ways to circumvent that or find other creative solutions. So creativity. And embracing new technology is perhaps what's going to help the brand succeed and have a competitive advantage before this becomes common, you know, it's like the people that got on Google ads before Google ads became all that popular, they enjoyed the lowest cost per click, and that's the same thing here.

Yeah. The early adopters usually win. Uh, I'm a big fan of early adopting things. So, um, if you listen to this and this will be early January and I know a lot of merchants out there in the beginning of the year are looking into their tech stack and looking into optimizing their business. This solution sounds for me like a great way to really create a win win situation for everyone involved.

Man, thanks so much. I will put the links in the show notes as always, then you will be just one click away and I hope a lot of our listeners will contact you. Thanks so much for your time today. 

Thank you, Klaas. Thanks again.