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What a higher return rate does to an online fashion retailer

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

An illustrative online fashion retailer in Germany has an average order value of EUR 80 and a gross margin of 50 percent on items that are kept. Every order costs EUR 5 to ship. Each returned order costs EUR 12 to collect, check, and restock, and earns nothing. The return rate is 30 percent of orders. What is the contribution per order, and what happens if returns rise to 40 percent?

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Contribution per 100 orders = gross profit on kept orders minus return costs minus shipping
- Kept orders earn 50 percent of EUR 80
- Returned orders cost EUR 12 each
- All orders cost EUR 5 to ship

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Gross profit on kept orders
What a strong candidate does: 70 of 100 orders are kept; each earns EUR 40.
Gross profit per 100 orders (EUR): 70 × 80 × 0.5 = 2,800
Step 2: Contribution at 30 percent returns
What a strong candidate does: Minus 30 returns at EUR 12 and 100 shipments at EUR 5.
Contribution per 100 orders (EUR): 70 × 40 - 30 × 12 - 100 × 5 = 1,940
Step 3: Per order
What a strong candidate does: Divide by 100.
Contribution per order (EUR): 1,940 ÷ 100 = 19.4
Step 4: At 40 percent returns
What a strong candidate does: 60 orders kept, 40 returned.
Contribution per order at 40 percent returns (EUR): (60 × 40 - 40 × 12 - 100 × 5) ÷ 100 = 14.2

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

The retailer should make cutting returns a priority, because ten more points of returns cut contribution per order from EUR 19.40 to EUR 14.20, a fall of about 27 percent. First, each return costs EUR 12 and loses the EUR 40 of gross profit on the order. Second, this means better size guidance and accurate photos are often worth more than a small price increase. The risk is that return fees for serial returners push away good customers. As a next step, test better size guidance in the categories with the highest return rates.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.