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?

Earphone category is seeing the returns which is driving down the profits-

Primary Investigative Questions-

1) Is it specfic to a brand or in general?

2) Is it specific to a geography where the company is a big player?

3) Whats the timeframe are we considering? Did it happen recently around the time of competitor's sale day?

My next step would be to gather data from the recieved feedback on the returns or the product description page-

REASONS

There could be multiple reasons for it-

1) Defective Earphones( Specific for a major player in a major geography)

2) Incorrect Product Description

3) Incompetitive Pricing

 

SOLUTIONS

 

Case 1- Defective Earphones

As returns not only affect profits but brand perception as well, it will be better to remove the specifc product from the category. Consulting the brand to look into the manufacturing issue that might have caused cases of faults,explosions which further creates panic in the market.Once it passes all the product assessments, will get it back into the category.

 

Case 2- Incorrect Product Description

Could be with multiple sellers or a single seller. The best possible way is to have a 3D embedded view of the product with standardized dimensions across the site. 

Case 3-Incompetitve Pricing(Highly Unlikely)

If this is the case, will review the pricing and tend to make competitive with the other player. This case is the most unlikely though

 

 

To solve this Flipkart product strategy question, 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

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 reasons for return. Usually when you return something, stores ask why. See if there's any data there

2) Try to narrow down where the returns are happening. Understand whether the returns are across different regions. For example: more people are returning earphones in the US. It could be that defects were shipped to a specific market.

3) See if there's customer feedback/reviews on the earphones. Understand what customers are saying about the product

4) Use the product myself. It could be that there's something defective about the product

5) Understand how the product was advertised. For example: if the earphones are supposed to be waterproof. Are they really waterproof? Or if the product was marketted towards youth and adults are buying it. Is there a gap in who's it's designed for and the purchaser? Understand if there's any gaps in how the product was designed vs. customers expectations.

To wrap this part up - essentially I'm trying to understand the root cause of the returns.

If it turns out that the product was defectived, I would discontinue the product and release an annoucement explaining what's going on. Else, if it's working properly - then I would come up with a game plan to re-brand how the product would be marketted. When selling anything, you don't want to lose the trust of a customer. Companies should try be as transparent as they can.