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A product line analysis saves $200,000 annually

Client: Bricks and mortar retailer.

Situation

In an effort to compete with online sales, our client had introduced a new product line that was not sold on the web. They had not taken into account that this new product line had a much lower profit margin and they were not able to raise the sale price. Sales were strong and this new line cannibalized their other sales, leading to profitability issues.

Process

Analyzing the company statement of accounts revealed an increase in the cost of sales, and this was then traced back to the new product line. Using this data, the leadership team conducted several brainstorming sessions to generate options, which were reviewed for impact on customer loyalty, staff acceptance, and profitability.

The need to reverse the earlier decision and remove the new product line was communicated to staff so they could comment and get comfortable with the change before they had to explain it to their customers. This valuable feedback was rolled into a larger initiative which led to several other projects that increased value for customers.

Savings

This change resulted in annual savings of over $200,000 and product sales remained as strong overall, despite facing more on-line competition.

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