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Medium Profitability Diagnostic Analysis Product Launch

Down Under

#Sports Goods #Retail #Apparel #Consumer Goods
ProHub Comment

This is a diagnostic case requiring candidates to identify root causes through structured data analysis. The key challenge is recognizing that a new product category (Surf Equipment) underperformed at Surf Shops (50% of forecast), and candidates must work through financial exhibits to isolate this issue before proposing solutions focused on channel strategy and customer experience.

Estimated Time 15 minutes
Difficulty Medium
Source Cornell
50 / 100
Our client is Down Under Apparel an Australian based swim wear and lifestyle company. The company unexpectedly missed its internal earnings target. The CEO has called your team to help diagnose the problem and provide a recommendation.

Clarifying Information

  1. The client competes against a difference competitor set depending on the product. Historically, the Maui was the largest rival in the surf and athletic swim wear, but offered lower quality products at lower price points.
  2. The client has no interest in growth through competitor acquisition.
  3. Surfers and Professional Athletes (30% of Revenue): Values performance and cutting edge technology (hydrodynamic). Willing to pay for performance, yet low earnings for the average suffer and swimmer suggest limits to what they will pay
  4. Luxury Seekers (70% of revenue): Fastest Growing segment, contributing to the explosive growth. These are casual users who enjoy the performance but not a key to buying process. Values the brand and ascetics. Brand offers legitimacy.
  5. Surf Shops: Typically small independent retailers located in beach towns. Client has long standing relationships and entry point for any given market. See more Surfers and Professional Athletes. Carry limited merchandise due to small locations, almost exclusively performance wear.
  6. Big Box Retailers (think Dick’s, not Walmart): Asking for products at targeted price points to appeal to their customers. Typically more price sensitive customers. Offers a wide variety of performance wear and equipment (boards, beach equipment etc.) some lifestyle products. Frequent Sales
  7. Department Stores (think Bloomingdales, not J.C. Penny): Least price sensitive customers. Offers a wide variety products focusing on the lifestyle wear. Only channel outside online that offers the resort collection.
  8. Direct to Consumer (Online): Attracts repeat customers who are already familiar with brand and products. Never puts anything on sale.