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The earphone category at Flipkart is seeing a lot of returns and making this category non-profitable. What will you do as a category manager?
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in Strategy by (32 points) | 167 views

3 Answers

+1 vote

To solve any problem, let's first identify the problem's key operative words in the problem statement.

The earphone category at Flipkart is seeing a lot of returns and making this category non-profitable. What will you do as a category manager?

To solve this problem (we found 3 things to focus on)

  • Earphone - Let's understand what factors earphone has (for system's pov let's treat them as important tags / meta)

  • Returns - why users return the products

  • Profits - equation of profit, factors affecting profit

 

Earphone

  • brand

  • price

  • type of earphone (for e.g., in ear, over ear, bluetooth earphones etc)

  • discount given on earphone product

  • new vs used/refurbished 

  • images, description

Returns

  • expectation mismatch (from product received vs. product visible on platform)

  • quality of product (faulty, lower quality standard)

  • impulse purchase

  • got wrong product

Profit

  • Sales (PxQ) - Cost (delivery cost + return cost + inventory, holding cost, procurement cost)

To increase profit, we can 

  • reduce return %age

  • increase Sales w/ same level of return %age

    • can increase price (P) by offering less discounting on sold product.

    • can increase quantity sold (Q)

 

Part 1 - Reduce returns

Let’s understand which products gets returned the most. See data for 

  • Product id (returned)

  • Brands 

    • Unknown brands (white label)

    • Growing brands (not a household name yet)

    • Established brands

  • Price

    • Low 

    • Medium

    • High

    • Super expensive

  • Type

    • In ear

    • Over ear

    • Bluetooth 

 

Assumption - Let’s focus on brands (Unknown, Growing), price (Low, Medium) and type (bluetooth) are the type of earphone returned the most.

 

Return reasons 

  • Expectation mismatch

  • Impulse purchase

 

Data to check (Hypothesis)

  • Wrong Recommendation - leading to returns

    • Check logic for content based filtering 

    • Check logic for collaborative based filtering

  • Product detail page is confusing and doesn’t create trust (product bought vs product received are different)

    • Check data for image clicked; purchased then returned

    • Description - Time spent on page

    • Time taken to add to cart / buy now - lower time taken usually will lead to impulse purchase

    • Compare product - did user see this data or not.

 

Possible Solution

  • Changes in recommendation logic / position where it is shown (Home page, listing page, detail page, cart page)

  • Product detail page - meta improvement

  • Check product returned; rank in recommendation & listing pages. If returned give them -ve weightage to move them down

  • User who returned the product; don’t show return option and highlight this on detail page

    • In some geographies (where return cost is high)

    • Price pt. With brand name - check on marging (if going -ve; don’t allow returns)

 

Part 2- Increase sales

Solutions / improvements

Discount optimization

  • Reduce discounts - if discount are heavy -> give no return policy

  • Reduce discounts - if discount are low -> allow returns

  • Discount based on customer lifecycle (use Customer life cycle - CLV)

    • Done more than 15 txn - heavy discount

    • Less than <5 txn - no refund / returns

    • Subscription user - can offer higher discounts

  • Less discount on products 

    • Less stock

    • Present in outskirt godowns

  • More discount on product

    • Bulk stock (hot products)

    • Using holding cost (remove)

    • Nearer to godown 

 

Increase quantity sold

 

  • Ads / promotions on recommendations, list pages, cart, home page

  • Create videos, special landing pages, banners to top selling products

  • Flash sales

See less
by (65 points)
0 votes

I'm assuming the earphones are sold in stores and online. As a category manager - I would first understand why the earphone category is seeing a lot of returns. Questions I would ask are: 1) Categorize the re…See more

by (60 points)
0 votes

Follow up questions:Are the returns increasing on all vendor products? I'd assume it is concentrated to be one vendor that has a larger market share to impact the net margins of the category itself.Is any one …See more

by (24 points)
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