Bain Online Test - Grocery Retail Co. (Guidance on Questions)

Bain & Company Online test
Edited on Jun 02, 2020
3 Answers
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Anonymous A asked on May 31, 2020

CASE CONTEXT
Grocery Retail Co. is a premium grocery retailer with presence in major metro cities across India. Its value proposition is focused on specialty premium grocery (e.g. global cuisines, exotic foods, etc.). The current value proposition is not driving profitable economics — while sales have grown, there is persistent loss of profitability. Customer behaviour is highly skewed towards infrequent one-off purchases — low share of repeat high frequency customers who relied on the store for their regular shopping needs. Current assortment is heavily proliferated with high Inventory days and non-moving stock leading to sub-optimal throughput.

QUESTION 1
Which of the following factors should Bain analyse first? Choose One
A. Current value proposition and value proposition of competitors, global players etc.
B. Contracts for purchase of various SKUs (stock keeping units)
C. Employee wages to be benchmarked against competitors
D. Store locations to assess spread and focus

QUESTION 2
Which of the following is NOT a priority for the client? Choose One
A. Improving customer loyalty
B. Increasing frequency to reduce inventory days
C. Improving profitability and margins
D. Identifying profitable stores and closing down others

(edited)

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Ian
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updated an answer on Jun 02, 2020
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Hi there,

I'm very sorry but Clara and Udayan's answers are wrong. The answer is A and D. (Though Answer B for Q1 is indeed tempting)

Let's talk through this....

------------------------------------------------------

The key here is to identify what matters. What clues are you getting in the text? I.e. what moves the needle? I see two clear phrases:

1) The current value proposition is not driving profitable economics (loss of profitability)

2) Customer behaviour is highly skewed towards infrequent one-off purchases

3) High Inventory days and non-moving stock leading to sub-optimal throughput.

----------------------------------------------------------

QUESTION 1
(ANSWER) A. Current value proposition and value proposition of competitors, global players etc.

  • Value proposition! This is the answer...the text explicitly told us the current value proposition is a big issue. We need to first decide if the big-picture i.e. the highest-level decision makes sense, before we dive into any specifics.

B. Contracts for purchase of various SKUs (stock keeping units)

  • Irrelevant...nothing like this is mentioned. It is tempting to pick this one as we know we have a problem with stock. However, the problem is regarding throughput not contracts.

C. Employee wages to be benchmarked against competitors

  • Irrelevant...nothing like this is mentioned

D. Store locations to assess spread and focus

  • Irrelevant...nothing like this is mentioned

---------------------------------------------------------------

QUESTION 2
Which of the following is NOT a priority for the client? Choose One
A. Improving customer loyalty

  • Of course it is! Customers aren't coming back..that's a problem...loyalty means they come back...i.e. repeat purchases...i.e. this is a focus

B. Increasing frequency to reduce inventory days

  • We have high inventory days. This is a problem for profitability. So, reducing them is good

C. Improving profitability and margins

  • Of course! We said we have a profitability issue

(ANSWER) D. Identifying profitable stores and closing down others

  • Store-specific profitability isn't mentioned anywhere. We can't make this assumption!

(edited)

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Udayan
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updated an answer on Jun 02, 2020
Top rated McKinsey Case & PEI coach/Multiple real offers/McKinsey EM in New York /6 years McKinsey recruiting experience

Hi,

I have a slighly different answer/logic

Question 1 - I did go back and forth on this as it isn't super straighforward in my opinion

B

Option A- agree with Ian that it is stated in the question. However it is not as simple as that. A poor value proposition would mean no/declining sales. If you are targeting a market that does not exist you wont have people buying to begin with.

Option B - Contracts for purchase of various SKUs -If your throughput (days to sell inventory) is not aligned with the contract terms you have there is a strong chance your profits might be affected. For example - if you have 60 day payment terms but goods often stay on your shelves for 90 days your profit will take a hit as your payment terms aren't favorable

Option C - affects profitability in general but nowhere here is this mentioned as an issue

Option D - Not a factor here - Again this could affect profitability but the question is very clearly not focused on locations or rents or foot traffic

Question 2 - a lot more straightforward

D.

The prompt states that the throughput is low and that assortment is skewed towards stock that isn't moving. It also states that the share of repeat customers is low (loyalty) and profit is an issue. So that rules out A, B and C

Even though profit and store count can be related, here the issue identified lies with the inventory and infrequent repeat purchases.

Best,

Udayan

(edited)

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Clara
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replied on May 31, 2020
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Hello!

1. A

2. B -this one is very obvious-

Where did you find this material?

Hope it helps!

Cheers,

Clara

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Ian gave the best answer

Ian

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