When Hyaat Chaudhary founded Luxome in 2018 to sell luxury weighted blankets, “returns were an afterthought,” he said. Not every customer wants to keep the products they order, so returns piled up at the warehouse.
Other retailers disposed of their returns in landfills. “It just drove me crazy as a human being. It seems wasteful, and I care about the environment,” Chaudhary told Business Insider.
At one point, Chaudhary donated 5,000 weighted blankets locally. His approach flooded the market, and Luxome customers started canceling their orders, he said. Instead, they were purchasing “new open box” Luxome blankets on eBay from resellers contracted by the nonprofits Chaudhary had donated to.
“Most companies are not set up to take back goods as first quality. You need a packaging machine and boxing to make it look perfect, like it came from a factory,” Chaudhary told Business Insider. He tested a high-end service that cleaned and repaired textiles for potential resale, but found the quality was unacceptable.
Luxome now relies on LiquiDonate, a software company using AI to match returns with appropriate nonprofits. The customer receives a shipping label to an interested nonprofit for usable Luxome returns that won’t be resold. Shipping is around 25% lower than a warehouse return, as matched nonprofits are typically closer than the warehouse. Returns are spread throughout the country and do not cannibalize sales, Chaudhary said.
An old problem, with a twist
With e-commerce, returns may seem like a new predicament. They’re not.
“This problem goes back to the late 19th century, with the emergence of the first department stores such as Macy’s, and the first mail order catalog, like Montgomery Ward’s,” said Huseyn Abdullah, Ph.D., an assistant professor in supply chain management at Haslam College of Business at the University of Tennessee, Knoxville.
He said return rates then and now are similar: around 10% in-store, and 30% for mail order. “It’s been quite steady over 100 years. What’s changed is that the volume increased as the retail sector has been growing much faster.” In 2025, retail returns were estimated at $850 billion.
Consumers often believe that most returned products are resold, said Abdullah, but the resell percentage is actually low. An estimated 9.5 billion pounds of returns are sent to landfills, according to a 2022 report from Optoro, a software company that helps businesses manage returns.
This is pushing companies to think about new solutions.
Enter LiquiDonate, an AI-native platform
Disney Petit, the founder and CEO of LiquiDonate, told Business Insider that she was motivated to divert returns from the landfill to nonprofit organizations. She piloted FoodFight! in 2018, Postmates’ program for donating excess restaurant food to shelters. After Uber purchased Postmates, Petit saw retail returns as the next category to tackle.
LiquiDonate was built as a native AI platform, incorporating an AI computer vision tool. Customers photograph the product and the software determines, based on the retailer’s preferences, what should happen to it. A stained garment may be routed to a textile recycler instead of donation.
“We take inputs like condition, cost to move the item, retailer preference, nonprofit need, proximity, and equity into consideration with our algorithm,” said Petit. “Then we evaluate every possible path—restock, resale, donation, recycle—and rank them based on total outcome. What makes this different is we’re optimizing for both financial return and real-world impact at the same time.”
Petit launched LiquiDonate in 2021, signing up Restoration Hardware as its first customer, noting that after food, the hardest donation category is furniture. LiquiDonate’s API platform plugs into retailers’ existing software to match returns based on multiple factors.
The company, which now works with 4,300 nonprofits, is category-agnostic, but specializes in large and bulky items that are difficult to return, and to donate. It also specializes in apparel, which is inexpensive to produce and less profitable for retailers to resell.
Chaudhary piloted LiquiDonate in 2024, initially with a direct warehouse donation of 10,000 blankets, distributed around the country. Luxome then began using the software for individual returns. When initiating a return, customers check off whether the item is open, autogenerating a return label to a matched nonprofit or Luxome’s warehouse. “We don’t get any returns to our warehouse unless it can be put back in stock,” he said.
Retailers save, even when paying a $4 item fee to LiquiDonate, since warehouse returns cost Luxome $4 to $5 in third-party fees for processing, storage, and landfill costs. Donation return label costs are lower than returns to Luxome, as items are typically shipped within 30 miles of the customer, said Chaudhary.
LiquiDonate generates a tax receipt per donation, which companies can download to file for deductions. “We’ve turned it into a systematized, automated layer,” said Petit.
Chaudhary said he was initially worried that nonprofits might resell items or that staff would use them. Piloting the service and talking with nonprofits alleviated those concerns, he said. He’s also received positive feedback about how Luxome’s robes, apparel, and bedding have helped people coming out of homelessness.
