The Store That Looked Like a Star
StyleHub runs three stores. In Q1, Store A had 20,000 visitors, gross sales of ₹48 lakh and returns of ₹2.4 lakh. Store B had 30,000 visitors, ₹75 lakh gross sales and ₹3.75 lakh returns. Store C had 15,000 visitors, ₹45 lakh gross sales and ₹2.25 lakh returns. In Q2, A's visitors rose to 24,000, gross sales to ₹60 lakh and returns to ₹9.6 lakh after a supplier's batch caused fading complaints. B's visitors rose to 31,000, gross sales to ₹81 lakh and returns to ₹4.05 lakh. C's visitors fell to 14,000, gross sales rose to ₹46 lakh and returns were ₹2.3 lakh; C's Q2 figure includes a one-time ₹8 lakh institutional order that will not repeat. The marketing head has ₹6 lakh for Q3 and wants to fund the store with the fastest growth. The finance head wants net sales per visitor, not gross sales, as the productivity measure.
1. Compute Q2 net sales per visitor for each store, adjusting Store C for the one-time order. Show the formula.
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Net sales = gross sales − returns; per visitor = net sales ÷ visitors. A: ₹60 lakh − ₹9.6 lakh = ₹50.4 lakh; ₹50,40,000 ÷ 24,000 = ₹210. B: ₹81 lakh − ₹4.05 lakh = ₹76.95 lakh; ₹76,95,000 ÷ 31,000 ≈ ₹248. C: reported net = ₹46 lakh − ₹2.3 lakh = ₹43.7 lakh. Remove the ₹8 lakh one-time order: ₹43.7 lakh − ₹8 lakh = ₹35.7 lakh; ₹35,70,000 ÷ 14,000 = ₹255. Without the adjustment C looks like ₹312, which is misleading. For comparison, Q1 figures were A ₹228, B ₹237.5, C ₹285. So A's per-visitor productivity fell, B's rose modestly, and C's adjusted productivity fell from ₹285 to ₹255.
2. Which store's Q2 growth is most credible and which is least credible? Use net sales per visitor and at least one other metric.
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B is most credible. Its footfall grew only 3.3%, but net sales grew 8.0% and net sales per visitor rose from ₹237.5 to ₹248, so growth came from better conversion or basket size, not just traffic. Returns stayed near 5% of gross sales. A is least credible. Gross sales rose 25%, but returns jumped from ₹2.4 lakh to ₹9.6 lakh, or from 5% to 16% of gross sales; net sales grew only 10.5%, and net sales per visitor fell from ₹228 to ₹210. The fading-batch complaints point to a quality problem, not healthy demand. C's reported gross growth of 2.2% is also illusory: excluding the one-time order, adjusted net sales fall 16.5% and adjusted per-visitor sales fall 10.5%.
3. Allocate the ₹6 lakh marketing budget. Justify with numbers and name one caveat.
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Give B ₹4 lakh: it has the only credible productivity improvement and stable returns, so incremental marketing is likely to convert. Give C ₹1.5 lakh for a retention and local-promotion test: its adjusted per-visitor sales of ₹255 is still the highest, despite falling traffic, so the problem may be reach rather than spend efficiency. Give A ₹0.5 lakh, ring-fenced for service recovery only, not traffic generation, until the supplier batch issue is fixed. A's traffic rose 20% while per-visitor sales fell 7.9%; sending more people into a store with a 16% return rate would amplify dissatisfaction. Caveat: if A's quality fix slips, move its ₹0.5 lakh to C and hold A at zero rather than reward traffic that destroys margin.