About
The client observed a noticeable decline in sales across all retail locations. For a deeper analysis, the retail store with the steepest decline was selected as a case study. All supplier and product details have been redacted for confidentiality.
Summary
The sales decline was not driven by inventory shortages or regional economic challenges but was instead caused by store layout, staff training gaps, and personal preferences. These factors influenced staff to focus on selling low-cost, low-margin products, which directly impacted both invoice value and volume.
Detailed Analysis
Product Category Sales
At first glance, year-over-year (YoY) sales appeared to be declining across most product categories (CATs), except for CAT5 and CAT10. For instance, CAT1 sales dropped by XX%, with monthly figures trailing the previous year’s targets as highlighted in red, except for a brief recovery in October and December as highlighted in green. However, this recovery may not signal improvement, as it likely reflects a downward trend from late in the prior year.
The situation is worse than it seems because half of CAT5’s growth was due to reclassification of CAT8 products as CAT5, which was too insignificant to adjust CAT8’s overall performance that experienced the steepest decline, despite ample inventory. Additionally, CAT7 and CAT9 poor performance correlated strongly with declining sales in CAT8 but also suffered stiff price competition from categories’ primary competitors.
Supplier Analysis
Sales By Supplier
Supplier analysis revealed strong growth among new and select existing suppliers, but this failed to offset the decline in sales from underperforming suppliers, particularly SUP1 (CAT8) and SUP2 (CAT7 and CAT9).
While SUP2 struggled due to competitive pricing pressure, SUP1 was the key driver behind the sales decline. Despite maintaining high inventory levels throughout 2024, SUP1’s sales plummeted at this location, whereas other suppliers showed either growth or a moderate decline.
Margins By Supplier
Profit margins for top-performing suppliers were shrinking, with many already operating on slim margins. Meanwhile, SUP1 margins dropped at the analyzed store but grew at other nearby locations, suggesting location-specific challenges.
Supplier Sales Across The Region
Despite significant losses at the study location, SUP1 performed better in other stores, reporting smaller sales declines. With improving margins at these locations, SUP1’s overall YOY profit decline remained absolutely minimal compared to the double-digit percentage losses suffered at the analyzed store.
Sales By Unit Of Measure
Sales can be measured in revenue, quantity, specific units of measure (e.g. LB for pounds or SF for square feet) or other metrics.
In 2024, UOM sales volume remained largely stable, reflecting SUP1’s sales drop as highlighted in black, but revenue declined disproportionately.
Significant CAT8 revenue drop despite stable UOM sales hint at low-priced or low-margin sales at the study store since SUP1 reported stable sales across the region.
Supplier UOM Sales and Margins
Interestingly, while revenue data on the previous page suggested that top-performing suppliers did not compensate for SUP1’s losses, UOM data painted a different picture.
Top-performing suppliers gained nearly the exact volume SUP1 lost, further supporting a shift toward low-priced or low-margin products.
Products from China and India, discontinued items, or sales to member customers with special pricing accounted for much of the sales volume, indicating a preference for discounted, low-margin products rather than high-value alternatives.
Recommendations
The sales decline is likely linked to store layout, staff preferences, and insufficient customer engagement, rather than external factors such as economic conditions. Foot traffic to the store increased by X%, with some nearby stores experiencing a 10X percent of that growth, suggesting steady demand. Key issues include:
- Failure to greet, help and convert walk-in traffic into sales as evidenced by declining number of invoices despite steady traffic and growing number of 1-star reviews citing poor customer service.
- Unanswered phone calls and emails, potentially contributing to fewer visitors than at nearby locations.
- Lack of upselling, staff preference for low-margin products, and eagerness to offer big discounts, as reflected in the data.
Staff training and store layout should focus on promoting high-value products and suppliers. The CAT8 sales drop disproportionally affected SUP1 sales which can only be explained by performing qualitative data research. Conducted interviews suggest negative perceptions of SUP1 and SUP3 as ‘glorified inferior products’.
Conclusion
The decline in revenue as well as the average number and value of invoices was primarily due to store-specific issues: poor layout design, inadequate staff training, and personal biases that pushed sales toward low-cost, low-margin products and away from key suppliers as SUP1 and SUP3. Addressing these issues with targeted training, improved customer engagement, and a re-evaluation of store layout can reverse this trend and increase sales in terms of both revenue and profitability.
