When Hyatt Chaudhary founded Luxome in 2018 to sell luxury weighted blankets, “returns were an afterthought,” he said. Not all customers want to keep the items they order, so returns pile up in warehouses.
Other retailers disposed of returned items in landfills. “It 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 to the local community. His approach flooded the market, and Luxome’s customers started canceling orders, he said. Instead, they had purchased “new, unboxed” Luxome blankets on eBay from a reseller contracted with the nonprofit organization Choudhary had donated to.
“Most companies aren’t ready to take the product in the highest quality. They need packaging machines and boxes to make it look as perfect as it came from the factory,” Chaudhary told Business Insider. He tests a high-end service that cleans and repairs textiles for potential resale, but finds the quality unacceptable.
Luxome currently relies on LiquiDonate, a software company that uses AI to match revenue with appropriate nonprofit organizations. Customers will receive a shipping label addressed to the nonprofit organization of interest for useable Luxome returns that will not be resold. Matching nonprofits are typically closer to the warehouse, so shipping costs are approximately 25% lower than warehouse returns. The returns are spread across the country and won’t cannibalize sales, Chaudhary said.
A twist on an old problem
In e-commerce, returns can seem like the new predicament. it’s not.
“This problem dates back to the late 19th century.th “The century began with the advent of the first department stores such as Macy’s and the first mail order catalogs such as Montgomery Ward’s,” said Hussein Abdullah, Ph.D., assistant professor of supply chain management at the Haslam College of Business at the University of Tennessee, Knoxville.
He said the return rate was the same then and now, at about 10% for stores and about 30% for mail order. “For 100 years, this number has been very stable. What has changed is that the retail sector is growing faster, so sales volumes have increased.” Retail revenue in 2025 is estimated at $850 billion.
Abdullah said that while consumers believe that most returned products will be resold, the actual resale rate is low. An estimated 9.5 billion pounds of returns are sent to landfill, according to a 2022 report from Optro, a software company that helps businesses manage returns.
This is causing companies to consider new solutions.
input AI Native Platform LiquiDonate
Disney Petit, founder and CEO of LiquiDonate, told Business Insider that there is an incentive to divert revenue from landfills to nonprofits. She piloted a food fight! In 2018, a Postmates program was launched to donate surplus restaurant food to shelters. After Uber acquired Postmates, Petit saw retail returns as the next category to tackle.
LiquiDonate was built as a native AI platform that incorporates AI computer vision tools. When a customer takes a photo of a product, the software decides what to do with it based on the retailer’s preferences. Soiled clothing may be sent to a textile recycler rather than being donated.
“Our algorithm considers inputs such as condition, cost of moving goods, retailer preferences, nonprofit needs, proximity, and fairness,” Petit said. “We then evaluate all possible routes, including restocking, reselling, donating, and recycling, and rank them based on overall performance. What’s different about this is that we’re optimizing both economic return and real-world impact at the same time.”
Petit launched LiquiDonate in 2021, signing Restoration Hardware as its first customer, noting that furniture is the most difficult donation category after food. LiquiDonate’s API platform connects to retailers’ existing software and matches revenue based on multiple factors.
The company, which currently works with 4,300 nonprofit organizations, is category agnostic, but specializes in large, bulky items that are difficult to return or donate. It also specializes in apparel that is cheaper to produce and less profitable for retailers to resell.
Chaudhary piloted LiquiDonate in 2024, initially donating 10,000 blankets directly from a warehouse and distributing them across the country. Luxome then began using the software for personal returns. When initiating a return, customers check whether the item has been opened and automatically generate a matching return label to the nonprofit or Luxome warehouse. “There are no returns to the warehouse unless we can put it back into stock,” he said.
Retailers save money because even if they pay LiquiDonate a $4 item fee, returns from the warehouse cost Luxome $4 to $5 in third-party fees for processing, storage, and landfill costs. Chaudhary said the cost of a donation return label is lower than a return to Luxome because the items are typically shipped within 30 miles of the customer.
LiquiDonate generates a tax receipt for each donation, which businesses can download to claim deductions. “We turned it into a structured, automated layer,” Petit said.
Choudhary said she was initially worried that the nonprofit would resell the items or that its staff would use them. Piloting the service and talking to nonprofits has alleviated those concerns, he said. We’ve also received positive feedback on how Luxome’s robes, clothing, and bedding have helped people transitioning out of homelessness.