Apparel Retailer

C: Could I please get bit more clarity on exactly how does our client work?

I: Our client is an apparel retailer who has multiple clothing outlets across cities. It carries its own brand as well as other brands as well. You could compare it to shopper’s stop, but of a smaller scale.

C: Thank you for the clarification. Since our brand has seen decline in profits, has there been any rise in costs for the client or a fall in revenues perhaps?

I: The client has faced a revenue decline. 

C: Has the client reduced the avg. price point of its goods or has there been any fall in avg volume?

I: Neither. Think harder. 

C: I would like to break down revenue further into this format:

ARPU = no of stores * no of walk ins * no of customers buying goods * avg basket size (volume per basket*value)

Do we know which head has taken a hit?

I: Upon inspection the client realized that the basket size in terms of value has decreased. Essentially the clothing retail industry works on a very discount heavy model. Approximately 25-30% stock towards the end is sold on heavy discount but for us, 40-45% stock has been selling on heavy discount.

C: Why are we giving heavy discounts? Is it a demand issue or a supply issue?

I: it is a supply issue. 

C: I would like to discuss the value chain – RM, inbound transportation, processing (both manufacturing and procuring from other brands), outbound logistics, at the retail shop, and lastly post customer service. Is there any particular head which has seen the issue?

I: Issue seems to be with the retailers.

C: To find the exact reason, I will try to map the customer journey

I: Issue happens to be that there is a stock out of common sizes very often. Due to this, we need to sell the remaining products towards the end of season at deep discounts.

It seems like we have found the problem, shall we move onto recommendations?

C: In the short term, the client can go for store-wise forecasting, install inventory management tools and add smaller warehouses to absorb the excess inventory (essentially layering up the supply chain). In the long run, the client can work towards making the stores as one-stop-shop, essentially catering to all the segments for a household consumer.