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McKinsey Medium Profitability Improvement

ShopOn Retail

#Retail #E-commerce
ProHub Comment

This is a structured profitability case requiring candidates to diagnose a rising returns problem through framework building and quantitative analysis. The case tests graph reading, calculation setup, and root cause identification—showing that product mix shift (not quality issues alone) is driving returns, with apparel being the primary culprit. The brainstorming component demands cost-benefit thinking around operational levers like supplier contracts and customer accountability.

Estimated Time 15 minutes
Difficulty Medium
Source ROSS
50 / 100
Our client, a US based e-commerce company, ShopOn, has seen a rise in customer returns over the last few quarters. Even though its revenue and market share have been increasing every quarter, the CEO is concerned that customer returns will start impacting the margins soon. The CEO of ShopOn wants your help to identify the reasons behind the high rate of returns and create a mitigation strategy.

Clarifying Information

  1. Customer returns refer to products returned by customers post-delivery and not order cancellations before delivery.
  2. The return period for any ShopOn product is 30 days from the day of delivery.
  3. Even though new competitors keep entering the market, there has been no new competitor in the last few quarters that could bring about any significant change to ShopOn. ShopOn is ranked #3 in the e-commerce space
  4. ShopOn holds 50% of the product inventory in its warehouses and 50% is a marketplace for sellers.
  5. The mitigation strategy should focus on both short-term (next 1-3 quarters) and long-term action items (next 2-3 years)
  6. No investment guidance has been provided.