Taken actions of the test stage resulted in a sharply increased flow of customers, and sales growth followed.
Challenge
The company, a domestic leader in the retail sector, decided to develop a strategy for progressing to a brand new stage in its growth journey. The company’s management was aware of some factors that were slowing down the company’s development, was guessing that other obstacles were present but found them hard to define, while some hurdles weren’t even manifest. Eventually, the company asked McKinsey for help. Since its establishment, the company had already worked with several other consulting agencies, but this time, it was us that they chose.
Discovery
We began by a detailed study of the client’s stores and came to the conclusion that most of them were too small. At the same time, there was too much merchandise inside, making customers feel as if they were in a warehouse rather than a respectable apparel store. Moreover, we found that the apparel mix on offer was not quite right, and the discount system was ill-thought-out. We advised the client to remedy all those deficiencies, starting from making the trading areas bigger.
We also helped the client expand their regional network. In order to do this, it was necessary to determine how many additional stores had to be opened, as well as, most importantly, to identify their locations. We have conducted analysis as to in which Russian cities new points of sale had to be established in order to attract the largest possible number of customers.
Based on the analysis results, we were able to determine the scale and coverage of the potential regional network.
Impact
The company decided to take our advice and open new stores in the cities that we had recommended. The network roll-out plan was successfully implemented, although more time was required to achieve this compared to the actual work on the project, which took about 6 months. The client also agreed that it was necessary to expand the existing stores, while new points of sale needed to have a floor area of at least 500 sq. m from the onset. In addition, within the framework of the new development strategy, the number of stores almost doubled. The company also expanded its merchandise mix by offering new apparel styles and adding products for age categories that had not been covered before, as well as various accessories. This resulted in a sharply increased flow of customers as soon as at the test stage of the new strategy, and sales growth followed.