BCG Beginner Case: Fashion startup

A very basic answer framework can follow the drivers of revenue, which would look like the following

Price (average selling price)

• Optimize pricing of existing product lines
• Run targeted discounts or seasonal discounts

Quantity (# of clothing sold)

• Increase online traffic & conversion
• Increase repeat purchases
• Expand product range

A good answer should elaborate on the specific ideas or hypotheses possible based on this client situation e.g. to increase online traffic the client can improve social media customer acquisition including using influencers, google ads, or they could expand partnerships with e-commerce platforms etc.

A more advanced answer could include other lenses of breaking down the problem, including the Ansoff growth matrix etc.

Population of country

• 30M

Gender split (males)

• ~50% males
• Therefore 15M male population

Relevant age group

• Only adult males, so assuming even distribution from 0-80 years old, the 20-60 age range would be ~50% of the male population
• Therefore 7.5M adult males

Segment by income tiers

• Population income distribution
  • Low income = 25%
  • Middle income = 25%
  • High income = 25%
• Therefore there will be adult males of
  • Low income = 25% * 7.5M =1.875 m = ~2M
  • Middle income = 50% * 7.5M =3.75 m = ~4M
  • High income = 25% * 7.5M =1.875 m = ~2M

Amount of spend on clothing per year

• Average spend per male per year
  • Low income = USD 50
  • Middle income = USD 200
  • High income = USD 500
• Total spend per income group
  • Low income = USD 50 * 2M = USD 100M
  • Middle income = USD 200 * 4M = USD 800M
  • High income = USD 500 * 2M = USD 1,000M

Therefore total market size for male fashion = USD 100M + USD 800M + USD 1,000M = USD 1,900M = USD ~1B

The insight seems to be that marketing spend was initially effective, but currently does not have an impact on sales

• For the first 5 months of the year, sales increased as marketing spend increased
• However, from June onwards, sales has remained effectively flat despite fluctuations in marketing spend (whether up or down)
• Therefore, it suggest that either the marketing campaigns have suddenly become ineffective, or it could be that they hit a saturation point in their target market, given they have niche, high priced clothing in a developing country

Clothing sales

• T shirts
  • 400 sold per month
  • Average price of USD 50
• Pants
  • 350 sold per month
  • Average price of USD 35

Operating costs

• Cost of Goods Sold
  • 50% of sales
• Rent:
  • USD 35,000 per year
• Labour
  • 3 staff in store
  • They earn USD 1,500 each per month
• Marketing
  • 5% of sales

A good candidate will note that launching a new store seems to be a good idea because it is profitable, and in addition raise further discussion points such as additional costs that may not have been factored in (e.g. renovation and setup cost)

Existing product (clothing)

• Use-case - e.g. work clothing, sports clothing
• Gender - they could branch out into female casual clothing
• Age - e.g. expand into kids wear

Adjacent products

• Shoes
• Bags
• Accessories

We've identified that our current marketing spend is not very effective - the data shows that changes in marketing ad spend (either up or down) do not significantly affect sales numbers. We have also explored some new ideas to boost sales, including launching a physical retail store and expanding the product lines. As a next step, we'd like to further analyze 2 things: 1) further validate assumptions on new store launch and 2) prioritize which new product idea to pursue. Lastly, some risks that the client could incur would be poor location of choice and underestimating the complexity of lauching new products