Apparel Chain

C : To reiterate the problem statement, the client operates in the apparel industry and is facing a decline in profits. First, I would like to know more about the client. Wherein do they operate within the value chain of the industry, and how long have they been seeing the decline in profits?

I : They is a retail chain & has been facing a decline in profits over the past 9 months.

C : How many branches do they have, and where are they located? Is the issue seen across the chain or a specific outlet? What kind of products do they sell – and who is their target customer?

I : We have 3 outlets across India (2 in Mumbai) & 1 of them is facing this issue. This outlet is in an upscale mall. We offer premium products for both men & women.

C : Alright, I also want to know where the client stands in relation to its competitors and whether the competitors have also been facing similar issues.

I : Only our outlet, along with a couple of others, are facing this issue, but it isn’t an industry-wide problem.

C : Okay. I believe I have sufficient knowledge to move forward with the analysis. Profits can be seen as a function of revenues and costs.

Revenues include sales from clothes and accessories, which are determined by the number of customers and the average ticket size per customer. Costs comprise all operational expenses – such as product procurement, distribution, salaries, utility bills, rent, advertisements, and promotions.

Do we have any information on which side is affected?

I : The costs have gone up slightly, but the revenue has decreased significantly.

C : Revenue is a function of the number of customers multiplied by the ticket size per customer. Ticket size is also determined by the product mix purchased. Do we know where the decrease has been seen?

I : The number of customers has decreased.

C : It can either be a supply-side issue or a demand-side issue. However, since the issue is isolated to only one outlet in Mumbai, it seems more likely to be a demand-side issue – meaning the demand for our products has decreased.

I : Correct, you may proceed.

C : To understand why, I would like to explore the customer journey in three phases:

Pre-phase: When customers decide which store to enter. Factors like brand awareness and accessibility of the outlet play a role here. Accessibility covers how easy it is for customers to reach the store and how attractive it is compared to competitors. This phase primarily impacts new customers.

During-phase: This involves product mix, store ambience, customer experience, and affordability. These factors influence repeat customers.

Post-phase: This includes customer service, product satisfaction, grievance redressal, and refund or exchange policies.

Do we know where might the problem lie?

I : The issue lies in the pre-phase, mainly related to the accessibility of the outlet.

C : Since the issue began only nine months ago, it suggests that a structural or environmental change might have occurred either inside or around the outlet. I would like to analyse accessibility under two aspects:

Journey to the outlet: This includes reaching the mall, navigating through escalators or lifts, and the ease with which customers can find and reach the outlet.

After reaching the outlet: The decision to enter depends on how appealing the store is compared to competitors, whether there are waiting lines, and whether the store is visually attractive.

Do we have any insights into which of these aspects is causing the issue?

I : The problem lies in the decision to enter the outlet. Customers are not entering our store.

C : I will break down the appeal of the store under four key sensory factors:

Sight: Includes lights, decorations, window displays, and visual appeal.

Smell: Refers to any pleasant or unpleasant odours near or within the store.

Sound: Covers background music or external noise that may impact the shopping experience.

Feel: Refers to the level of personalization or premium ambience the store offers.

Has any issue been identified under these factors?

I : Yes, a new washroom was constructed next to our outlet within the mall, resulting in a bad odour near the entrance, which is discouraging customers from entering.

C : Understood. Could the slight increase in costs also be attributed to this issue, possibly from efforts to manage or counteract the bad odour?

I : Yes, that is correct. The outlet has incurred additional costs to mitigate the odour issue. Do you have any recommendations for the client?

C : Here are my recommendations:

Short-term:

• Negotiate with mall management to enforce stricter cleaning protocols for the washroom.

• If the situation does not improve, collaborate with other affected outlets and collectively raise concerns by threatening to withhold royalties or rent payments temporarily.

Long-term:

• Explore relocating the outlet to a different part of the mall where such issues are less likely.

• Consider moving out of the mall entirely if the problem persists and other suitable locations are available.

I : That sounds like a practical plan. Thank you.