The effects of the returning behaviour in the profitability of customers within fashion e-commerce

Abstract

Purpose: The purpose of this thesis is to explore how the experience that customers gain by means of their purchasing and returning behaviour affects their profitability for the e-commerce fashion company. More specifically, how the profit per order or per period of time that this customers represent varies, depending on his previous experience. Method: The methodology followed for the present project combined the development of an algorithm to process the available raw data with a case study approach. In the first stage a conceptual model and an algorithm where developed, followed then by an analysis of the data obtained from the output of the model. The results of the analysis were then used to assess the defined research questions. Limitations: The scope of the project is limited to the case of a specific fashion e-commerce company, and the data used corresponds to the year 2009. Findings: Experiencing a return during the first orders of a customer enhances this customer’s confidence in the e-commerce company and increases the customer retention rate. However, customers who make returns from the first orders have higher chances of returning from the future orders they purchase and, therefore, these customers show a lower average profitability per order than those who do not return from those orders.