Operations: Reducing E-commerce Returns for Fashion Retail

Question

A global fast-fashion retailer has seen its return rate climb to 35% of total sales, costing $500M annually in logistics and markdowns. 1. Map the 'Reverse Logistics' process. 2. Propose three operational changes to reduce the return rate. 3. How can AI be used to mitigate this?

Accepted Answer

1. Process: Customer initiates return -> Shipping/Drop-off -> Warehouse Sortation -> Inspection -> Refurbish/Clean -> Re-listing or Liquidation. 2. Operational Changes: A. Implement 'bracket' sizing warnings (notifying users when they buy the same item in two sizes). B. Charge a nominal 'Restocking Fee' for non-loyalty members. C. Improve 'Size & Fit' guides with real-user photos. 3. AI Application: Use computer vision for virtual try-ons and predictive analytics to flag 'serial returners.' Results: Reducing returns by just 5% (from 35% to 30%) would save $71M (assuming $14.2M per 1%). The goal is to move from 'reactive' logistics to 'preventative' sales, focusing on fit-accuracy at the point of purchase.

Operations: Reducing E-commerce Returns for Fashion Retail

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