The End-Cap, the Cousin and ₹5,000 a Month
A 1,200 sq ft unisex apparel store in a Bengaluru suburb gets about 300 walk-ins a day. Its 4 sq m end-cap facing the entrance currently holds a premium skincare range priced ₹899-₹2,499. Last month's figures: skincare sold ₹18,000 at 42% gross margin from that end-cap; a kids' innerwear range on 6 m of back-aisle shelving sold ₹54,000 at 28% margin; a ₹499 T-shirt range on a 2 sq m four-way fixture beside the billing counter sold ₹96,000 at 35% margin. The owner's cousin supplies the skincare brand, wants the end-cap retained and has offered a ₹5,000 monthly display incentive. Fixed costs for rent, staff and utilities work out to ₹95,000 a month. The festive season begins in three weeks and the store has no sales data by fixture other than these monthly totals.
1. Using sales per square metre and gross margin, show which range deserves the entrance end-cap. State the assumptions you rely on.
Read the worked answer
Sales per sq m per month: skincare 18,000 / 4 = ₹4,500; kids innerwear 54,000 / 6 = ₹9,000; T-shirts 96,000 / 2 = ₹48,000.
Gross margin rupees: skincare 18,000 × 0.42 = ₹7,560; kids 54,000 × 0.28 = ₹15,120; T-shirts 96,000 × 0.35 = ₹33,600.
Gross margin per sq m: skincare ₹1,890; kids ₹2,520; T-shirts ₹16,800.
Assumptions stated openly: the 4 sq m is measured as end-cap face and sides; each figure is from the same month with similar seasonality; moving a range does not change its productivity; cross-selling and basket effects are ignored; 2 sq m beside billing benefits from impulse, so T-shirt sales may fall if moved.
Conclusion: the T-shirts earn about 8.9 times the gross margin per sq m of skincare (16,800 vs 1,890). Even if moving them to a 4 sq m end-cap does not double sales, and they deliver only half their current rate per sq m, they still produce roughly ₹33,600 of margin against ₹7,560. Kids innerwear is second on both measures and deserves better sightlines than a back aisle.
Caution: the T-shirt fixture sits beside the billing counter, where impulse buying inflates its rate. The correct move is a controlled test, not a permanent swap on one month of data.
2. How should the owner respond to the ₹5,000 display incentive and the cousin's request? Show the comparison and the ethical issues.
Read the worked answer
Quantify the offer first. Keeping skincare on the end-cap earns ₹7,560 of margin plus ₹5,000 = ₹12,560 a month. Putting T-shirts there, even at only half their current productivity per sq m, earns about ₹33,600. So the incentive does not compensate for the space: it is worth about 19% of the margin gap. A ₹5,000 incentive that costs ₹26,000 of margin is a bad trade, however friendly the supplier.
Ethical issues:
- Conflict of interest: the supplier is a relative. Any incentive paid to the owner personally, or kept off the books, is a related-party benefit and a potential misappropriation; it must be disclosed in writing and approved, and recorded as store income against a display agreement.
- Decision quality: a fixed display fee can quietly buy shelf decisions that the sales data contradict. If the owner accepts it, the decision should be reviewed quarterly against measured performance and the brand told so.
- Alternatives: ask the brand to move to a sales-linked incentive, or to fund a smaller, well-lit skincare section elsewhere rather than the prime end-cap. If the range stays for relationship reasons, that is a deliberate strategic choice with a stated cost, not a merchandising decision.
Practical line: 'The data says the end-cap has to be tested with apparel this festive season. I can offer you the aisle-end unit and a sales-linked incentive, and I will record the display fee in the books.' This protects both the relationship and the audit trail.
3. Design a three-week festive plan for the space and a measurement method that would settle the question.
Read the worked answer
Baseline first (before week 1): record each range's current sales, units, gross margin and location, and photograph the existing planogram. Without a baseline the test proves nothing.
Week 1 - reset:
- End-cap to festive T-shirts at a clear price ladder (₹399/₹499/₹599) with one bundled outfit offer; four faces, one story, one price message.
- Skincare to the 2 sq m fixture near billing plus one lit shelf, retaining basic visibility; tell the brand the reason.
- Kids innerwear to a 4 m aisle end visible from the entrance, not the back wall.
- Change only location, not price, to keep the test clean.
Week 2 - read and adjust: check daily units per sq m and margin per sq m for each range. If T-shirts fall more than 30% below their in-line rate, the impulse effect was real - move one face back beside billing. Replenish winners twice weekly; do not let the end-cap empty.
Week 3 - festive peak: concentrate stock on the best-performing range, add a second story only if space allows, and pre-plan post-festive markdown so leftover stock does not become dead stock.
Measurement: compare gross margin per sq m for weeks 1-3 against the pre-festive baseline and against the same weeks last year, then decide after four weeks. A single month is one data point; three comparable periods make it a merchandising decision. Record the final planogram with date and reason.