PayPal nabs another acquisition with Happy Returns deal

PayPal will acquire returns logistics business Happy Returns, which works with online merchants so customers can return unwanted merchandise at more than 2,600 drop-off locations throughout the US, for an undisclosed sum. The company also gives retailers software that lets them better manage returns. We predicted PayPal would go on an acquisition spree in 2021, and so far, the company looks to be moving in that direction. Happy Returns is PayPal’s second major purchase this year—in March, the payments giant bought cryptocurrency storage and transfer service Curv.

The Happy Returns acquisition is set to fortify PayPal’s business in two key ways:

• Strengthens merchant relationships: Returns are a major hassle for customers and can strain merchant logistics and cash flows. The pandemic-driven surge in ecommerce has only complicated matters: In 2020, customers returned approximately $102 billion worth of online merchandise, more than double the amount from 2019, according to the NRF. Acquiring Happy Returns can help PayPal simplify the returns process for its sellers, adding more value to PayPal’s platform and helping reinforce its relationships with them.
• Maintains competitive edge: Beyond strengthening existing relationships, the acquisition might also help PayPal attract new merchants and customers to its platform: In Q1, the firm reached 392 million accounts, 31 million of which were merchant accounts. Bringing in new account holders can help it stay competitive with other companies that are looking for similar capabilities: Affirm, for example, recently acquired online returns business Returnly for $300 million.

The acquisition continues PayPal’s evolution into an end-to-end commerce platform. Even though payments remain at the core of PayPal’s business, the company has gradually enhanced its full-suite retail and merchant services: In 2019, it acquired Honey, an online shopping and rewards platform, for a whopping $4 billion. The payments giant also launched PayPal Commerce Platform, an ecommerce system that enables shopping and comes embedded with PayPal’s payment solutions as well as other tools like fraud protection. PayPal’s acquisition of Happy Returns also comes as the company looks to reposition itself in search of new growth opportunities: On the company’s Q1 earnings call, CEO Dan Schulman said PayPal is planning to launch a super app that gives customers a “customized and unique shopping, financial services, and payments experience”—which Happy Returns can complement by making PayPal more of a retail one-stop shop.