Case study
A major department store chain’s growth strategy was in trouble—its same-store sales were slumping. Working with the top executives, we transformed the way the retailer selected products for its stores. Instead of a standardized approach, we helped decentralized the system so that stores could cater to local preferences, giving customers what they wanted—and boosting sales.
A leading department store chain, with hundreds of outlets, had pinned its growth strategy on a cookie-cutter approach, stocking similar products nationwide despite a huge range in store sizes, layouts and customer demographics.
Department StoreCo's* strategy was straightforward: After acquiring other retail chains, it wanted to grow revenues and maximize efficiencies by taking full advantage of its scale.
It wasn't a new strategy. Many giant retailers have built their success with a chain of identical stores. But times were changing; shoppers wanted more customized merchandise.
This trend was reflected in Department StoreCo's slumping sales. As pressure intensified, the CEO needed to find a way to rejuvenate sales.
Working with the CEO, we helped transform the retailer's growth strategy. Our research shows that tailoring product assortments to local tastes can boost same-store sales by 1 to 3 percentage points, and only 10 percent to 15 percent of the inventory needs to be customized.
Together with senior management, we designed a pilot project to identify localization opportunities. The process involved four steps:
Based on our assortment analysis and feedback from vendors, customers and store managers, we recommended that the company launch localization pilots in a range of stores, varying in size, location and customer demographics.
The database we developed and information from managers would allow the retailer to offer merchandise, geared to customers' different lifestyles and budgets. To succeed, the retailer needed to launch the pilot in stores with the largest growth opportunities and make some key changes:
The pilot store initiative we collaboratively developed quickly demonstrated success, proving the power of tailoring merchandise to shoppers' tastes and pocket books:
Most of the pilot stores were located in top performing regions. Even so, Department StoreCo was surprised when the pilot project debunked one its practices—offering limited product assortments in smaller stores. Some of the biggest sales increases were in small pilot stores with wealthier customers who were willing to buy more expensive fashions—if they were on the racks.
* We take our clients' confidentiality seriously. While we've changed their names, the results are real.