Frameworks for Retail Case Interviews

 

Don't memorize rigid frameworks. Instead, understand the underlying concepts and adapt them to each case.

 

Retail Profitability Framework

 

Start with the basic profit equation: Profit = Revenue - Costs.

 

For revenue, think about:

 

• Number of stores and comparable store performance
• Traffic (foot traffic or website visits)
• Conversion rate
• Average transaction value
• Pricing and promotional strategy

 

For costs, consider:

 

• COGS and gross margin
• Labor costs
• Occupancy costs
• Marketing costs
• Supply chain costs
• Shrinkage

 

Retail Market Entry Framework

 

When evaluating whether a retailer should enter a new market:

 

• Market attractiveness: How big is the market? Is it growing? What are typical margins?

 

• Competitive landscape: Who are the existing players? How strong are they? Is there room for another competitor?

 

• Customer needs: What do customers want that isn't being served? How would the retailer differentiate?

 

• Capabilities fit: Does the retailer have the skills, supply chain, and brand to succeed in this market?

 

• Financial viability: What's the required investment? What returns can be expected? What's the payback period?

 

Omnichannel Framework

 

For cases involving digital and physical channel integration:

 

• Customer journey: How do customers research, shop, and buy? Where do they want flexibility?

 

• Channel economics: What are the costs and margins of each channel? How does fulfillment work?

 

• Operational integration: Can inventory, systems, and processes be unified across channels?

 

• Competitive response: What are competitors doing? What's the cost of not acting?

 

How to Solve Retail Case Interviews Step-by-Step

 

Follow these six steps to solve any retail case interview.

Step 1: Understand the Problem

 

Listen carefully to the case prompt. Identify the client, their situation, and the specific question you need to answer.

 

Summarize back to confirm understanding: "So our client is a regional grocery chain with 50 stores, and they're seeing declining profitability over the past two years. They want us to identify the cause and recommend solutions. Is that right?"

 

Step 2: Ask Clarifying Questions

 

Good clarifying questions for retail cases might include:

 

• What type of retailer are we talking about? What do they sell?
• What's their geographic footprint? How many stores?
• How are they performing relative to competitors?
• Is the issue primarily on the revenue side or cost side?
• Are there any specific constraints or objectives I should know about?

 

Don't ask too many questions. Two to four is usually right.

 

Step 3: Build Your Framework

 

Take a minute to structure your approach. Write it down.

 

Your framework should be tailored to the specific case, not a generic template. If the case is about declining profitability, your framework should focus on the revenue and cost drivers most relevant to that retailer.

 

Present your framework clearly: 

 

"I'd like to investigate this in three areas.

 

First, I'll look at revenue trends to understand if the issue is traffic, conversion, or basket size. 

 

Second, I'll examine the cost structure to see if any major cost categories have increased.

 

Third, I'll assess the competitive environment to understand external pressures."

 

Step 4: Analyze the Data

 

Your interviewer will provide data as you work through the case. Analyze it carefully.

 

When looking at a chart or table, state what you observe, what it means, and what you'd want to investigate next.

 

Do the math accurately. Retail cases often involve calculations around margins, inventory, or growth rates.

 

Step 5: Develop Recommendations

 

Based on your analysis, develop concrete recommendations. Be specific.

 

Instead of "improve operations," say "reduce inventory levels by 15% by implementing demand-based replenishment, which would free up $10M in working capital."

 

Consider feasibility. What resources would implementation require? What are the risks?

 

Step 6: Deliver Your Answer

 

Synthesize your findings into a clear recommendation. Lead with the answer, then support it with your key findings.

 

"I recommend the client focus on improving in-store conversion rates, which have declined from 35% to 28% over the past two years. This is being driven by poor in-stock rates on high-velocity items. By improving inventory management, I estimate they can recover $15M in lost sales annually."

 

Retail Case Interview Examples with Solutions

 

Below are two full examples of retail case interviews. Follow along as we solve them step-by-step using the approach that we just learned.

Example 1: Department Store Profitability

 

Your client is a mid-sized department store chain with 80 locations across the Midwest. Over the past three years, profits have declined by 25% despite relatively stable revenues. The CEO wants to understand what's driving the decline and what they should do about it.

 

Clarifying Questions

 

Before building your framework, ask a few targeted questions:

 

• Is the revenue figure based on comparable stores, or does it include new store openings? (Interviewer confirms these are comparable store figures.)
• Has the decline been consistent across all 80 locations, or concentrated in certain stores or regions?
• Are there any major changes in the competitive environment we should know about?

 

Framework

 

Revenue Mix and Pricing

• Has the product category mix shifted? Are we selling more lower-margin items?
• How has our pricing strategy changed? Are we running more promotions or deeper discounts?
• What's happening to average transaction value and units per transaction?
• Are we seeing different trends across customer segments?

 

Cost of Goods Sold and Gross Margin

• How has gross margin trended over the three years?
• Have supplier costs increased? Have we renegotiated vendor contracts recently?
• What's our markdown rate on end-of-season inventory?
• How does shrinkage compare to historical levels?

 

Operating Expenses

• How have labor costs changed as a percentage of sales?
• What's happening with occupancy costs across our locations?
• Has marketing spend increased? What's the ROI on that spend?
• Are there any new cost categories or significant increases in overhead?

 

Analysis

 

The interviewer provides the following data:

 

• Revenue is stable overall, but the mix has shifted. Apparel (45% gross margin) declined from 50% of sales to 40%. Home goods (30% gross margin) grew from 25% to 35%

 

• Gross margin has declined from 38% to 34%. The primary driver is increased promotional activity. The percentage of sales at markdown has increased from 25% to 40%

 

• Labor costs as a percentage of sales increased from 18% to 21%. The company added floor staff to improve customer service, but conversion rates have not improved

 

• Marketing spend doubled over three years with no measurable lift in traffic or sales

 

Key Insight

 

The retailer has been discounting heavily to maintain traffic in the face of competition, which has eroded margins. The shift toward lower-margin categories compounds this problem. Meanwhile, they've invested in labor and marketing without seeing returns on either.

 

Recommendation

 

"Based on my analysis, I recommend three actions.

 

First, reduce promotional intensity and shift to more targeted markdowns based on inventory age and sell-through rates. This alone could recover 2 percentage points of margin.

 

Second, implement labor scheduling optimization to match staffing levels to traffic patterns rather than maintaining flat coverage. This could reduce labor costs by 1-2 percentage points of sales.

 

Third, cut ineffective marketing spend and reallocate a portion to targeted digital campaigns with measurable ROI. Together, these actions could improve operating margin by 3-4 percentage points."

 

Example 2: Grocery E-commerce Entry

 

Your client is a regional grocery chain with 25 stores in the Pacific Northwest. Two competitors have recently launched online ordering with home delivery. The CEO wants to know if they should enter the e-commerce market.

 

Clarifying Questions

 

• What is our client's current market position? Are they the leader, or a smaller player?
• Do we know anything about how the competitors' e-commerce offerings are performing?
• Does the client have any existing digital capabilities, like a loyalty app or website?
• Is there a specific financial target or timeline the CEO has in mind?

 

Framework

 

Market Attractiveness

• What percentage of grocery sales in this market are currently online?
• How fast is online grocery growing?
• What's driving growth? Is it a temporary shift or a permanent change in consumer behavior?
• Which customer segments are adopting online grocery?

 

Competitive Dynamics

• Who are the competitors offering e-commerce? What are their delivery models?
• How are they pricing delivery? Free above a threshold, subscription, or per-order fee?
• What's their customer experience like? How are customers responding?
• Are there barriers to entry we should consider?

 

Capability Requirements

• What technology infrastructure would we need? Website, app, order management system?
• How would we handle fulfillment? In-store picking, dark stores, or third-party?
• What's the delivery model? Own fleet, gig workers, or third-party partners?
• Do we have the talent to build and run this business?

 

Financial Viability

• What's the required investment to enter?
• What market share could we realistically capture?
• What are the unit economics of grocery delivery? Revenue per order, fulfillment cost, delivery cost?
• What's the path to profitability?

 

Analysis

 

The interviewer provides the following information:

 

• Online grocery is currently 8% of the market and growing 20% annually. The total grocery market in the region is $500M, so online is approximately $40M today

 

• Both competitors offer free delivery on orders over $50. One uses in-store picking with gig delivery. The other built a dedicated fulfillment center

 

• Our client has strong brand loyalty and the highest customer satisfaction scores in the region. However, they have no e-commerce infrastructure. Building a basic capability would require approximately $5M in technology and initial operating investment

 

• Industry data suggests grocery delivery operates at roughly 2% net margin due to high fulfillment and delivery costs

 

Financial Analysis

 

• Current addressable market: $40M (8% of $500M)
• In three years at 20% growth: approximately $70M
• If our client captures 25% share: $17.5M in revenue
• At 2% net margin: $350K annual profit

 

Against $5M investment, payback would take over 14 years on a pure financial basis.

 

Key Insight

 

The direct financial return is weak. However, the strategic risk of not entering is significant. If competitors capture online customers, those customers may shift their in-store shopping as well. Online grocery customers tend to be younger, higher-income, and represent the future of the customer base.

 

Recommendation

 

"I would not recommend a full-scale e-commerce launch given the weak unit economics and significant investment required. However, I also wouldn't recommend doing nothing given the strategic risk.

 

Instead, I recommend a pilot program: partner with a third-party delivery service like Instacart to offer e-commerce in 5 stores. This minimizes upfront investment while allowing us to learn customer preferences, test operations, and monitor competitive response. 

 

We can evaluate a larger investment in 12-18 months based on pilot results."

 

Retail Case Interview Practice Questions

 

Use these prompts to practice. Each represents a different case type.

 

1. A national sporting goods retailer has seen same-store sales decline 8% over the past year. What would you investigate to understand the cause?

 

2. An apparel retailer is considering entering the athleisure market. How would you evaluate this opportunity?

 

3. A grocery chain is experiencing significant shrinkage (inventory loss) at several stores. How would you diagnose and address the problem?

 

4. A department store wants to know if they should close underperforming stores or invest in renovating them. What framework would you use?

 

5. An e-commerce furniture retailer is struggling with high return rates (30%). How would you approach this problem?

 

6. A convenience store chain is considering adding fresh food and prepared meals. What factors should they consider?

 

7. A luxury retailer is deciding whether to sell through Amazon or protect their brand by staying off the platform. How would you advise them?

 

8. A big-box retailer wants to reduce supply chain costs by 10%. Where would you look for savings?

 

Tips for Acing Retail Case Interviews

 

I’ve compiled the very best tips for acing retail case interviews below. All of these tips specifically apply to retail cases in particular, so pay close attention to them during your retail case interview.

 

1. Think Like a Customer First, Then Like a Business

 

In retail, everything flows from customer behavior. Before diving into financial analysis, consider the customer experience. Why are customers choosing competitors? What friction exists in the shopping journey? What would make them buy more?

 

This customer-centric thinking differentiates strong candidates. Connect customer insights to business outcomes.

 

2. Connect Physical and Digital

 

Modern retail exists across channels. Don't analyze stores in isolation from e-commerce, or vice versa. Consider how customers move between channels and how the retailer should respond.

 

3. Remember That Location Matters

 

Retail is a local business. A store's performance depends heavily on its trade area demographics, competition, and accessibility. Aggregate numbers can mask significant variation across locations.

 

4. Consider the Labor Equation

 

Retail is labor-intensive. Store associates directly affect customer experience and sales. But labor is also a major cost. The best candidates think about labor as both an expense and an investment.

 

5. Don't Forget Seasonality

 

Many retail categories are highly seasonal. A case set in January might look very different in November. Ask about timing and consider how seasonality affects the analysis.

 

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