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Retry questionNorthBridge Retail
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NorthBridge Retail has asked OC&C to help explain why its profitability has been declining despite strong e-commerce growth. You’re meeting with the client’s CFO, who wants to understand what could be driving the margin erosion. How would you structure your analysis to identify the main causes behind this decline?
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Sample answer from an expert consultant
To identify why profitability has declined, the analysis can be structured around four main areas:
- Revenue Mix and Growth Drivers
- Assess contribution of each channel (in-store, BOPIS, online) to total revenue and growth.
- Examine shifts in customer behavior (e.g., online substitution of higher-margin store sales).
- Cost Structure and Fulfillment Economics
- Compare variable costs across channels, including logistics, delivery, and store labor.
- Evaluate impact of last-mile delivery and returns processing on margins.
- Pricing and Promotions
- Review discounting, delivery fees, and loyalty incentives by channel.
- Determine whether promotional intensity or free shipping eroded margin.
- Operational Efficiency and Channel Integration
- Identify inefficiencies in inventory allocation, fulfillment, and store utilization.
- Evaluate whether the BOPIS rollout created additional complexity or duplication of costs.
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