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Bain Medium Market Entry Profitability

Shoe Co.

#Consumer Product Goods #Retail
ProHub Comment

This is a straightforward market entry case focused on root cause analysis through customer research interpretation. The case effectively guides candidates through hypothesis formation, data analysis via three exhibits, and quantitative modeling to arrive at a profitability recommendation. The key challenge is recognizing that despite strong brand awareness, the conversion problem is driven by product design misalignment rather than pricing or other factors.

Estimated Time 15 minutes
Difficulty Medium
Source Chicago Booth
50 / 100
Our client, Shoe Co., is a small affordable luxury shoe retailer, branded as classic and fun. The average shoe sells at a price point of $300 per pair. Unfortunately, our client is facing a recent decline in the volume of same store sales despite the growth of same store sales for competitors. Our client hired us to understand the root cause of the client’s same store sales decline?

Clarifying Information

  1. Shoe Co. has a 70% consumer awareness but only a ~20% conversion rate to purchase
  2. This is a persistent trend due to a decrease in volume of purchases
  3. Approximately 30% (75% of 40%) of decreased purchases are for design reasons
  4. 40% of those familiar with Shoe Co. do not buy because of product issues
  5. Shoe Co spends significantly less in design compared to other competitors in the market
  6. Industry benchmark is 8% of sales, Shoe Co is currently at 6.5%
  7. Shoe Co has sales of $800M and Gross Margin % of 40%
  8. Bain Retail Expert expects that getting the assortment right can be worth between 5-10% in sales lift for the average retailer