Industry primers

Industry primer

Retail and Consumer Goods: A Case Interview Primer

Margins are often thin, so a point or two on volume or on the cost of the goods decides the year.

What's new here: how retail and consumer goods make money.

The business
Market
Not used in this case
Existing businessRevenue
Product 1
Price
  • List price
  • Discounts and promotions
  • Mix across tiers or sizes
  • Price against competitors
  • What customers are willing to pay
Quantity
  • Number of customers: market size x your share
  • Purchases per customer: how often they buy
  • Units per purchase
  • Customers kept versus lost
  • Capacity: how many you can actually serve
Product 2
Service 1
For a service, units are visits, hours or members
Mix
  • Share of revenue from each
Existing businessCost
Variable
Product 1
  • Materials or inputs per unit
  • Labor per unit
  • Delivery
  • Payment fees
Product 2
Service 1
Fixed
  • Rent
  • Salaried staff
  • Marketing and overhead
New business
Not used in this case
Operations and risks
Not used in this case
The business
  • 1MarketNot used
  • 4New businessNot used
  • 5Operations and risksNot used

Margins are often thin, so a point or two on volume or on the cost of the goods decides the year.

How the business makes money: who pays, for what, and the main costs.

Who pays

In retail and consumer goods

  • Shoppers pay the retailer
  • Retailers pay the brand, the consumer goods company that makes the product

For what

In retail and consumer goods

  • The retailer: goods on its shelves and online
  • The brand: cases of product shipped to stores

How revenue is earned

In retail and consumer goods

  • The retailer: shoppers × trips each × spend per trip
  • The brand: stores carrying it × units each store sells

The main costs

In retail and consumer goods

  • The goods themselves, usually the biggest line
  • Stores, staff and warehouses, mostly fixed
  • For a brand: making the product and marketing it

What decides profit

In retail and consumer goods

  • Volume through stores already paid for
  • What is left of each sales dollar after the cost of the goods

Two businesses share one shelf: the retailer sells to shoppers, and the brand sells to the retailer.

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