Recreation Unlimited Practice Case | Case Studies - Interview Preparation PDF Download

Business Situation

The consumer products industry is seeing increasing eCommerce sales from traditional brick-and-mortar retailers, e-tailers and direct-to-consumer manufacturers that is changing how the industry competes. Despite being known for its high-quality performance and lifestyle products, Recreation Unlimited has not successfully reacted to changing customer experience preferences and lags behind competition in eCommerce sales. Below are additional details about the Recreation Unlimited:

Company

• Recreation Unlimited was founded in 1952 in the United Kingdom
• $11 billion in global revenue
• 32,800 employees globally
• 200 company-owned retail locations

 Product offering

• Men’s, women’s and children’s t-shirts, jackets, hoodies, pants and shorts
• Sportswear and equipment associated with soccer, basketball, football, tennis, running, etc.

 Market and customers

• Competes globally while currently having the largest market share in Europe. Growth markets include Latin America, Asia-Pacific and Africa
• Currently 5% of sales are via eCommerce vs. an industry average of 10%

People and organization

• Turnover has been high amongst younger employees
• Employee satisfaction surveys have historically been great, however, they have started to decline over the past couple years
• Recreation Unlimited is a very hierarchical organization
• Spending on training programs has stopped over the past few years

Problem Statement

The client has engaged Deloitte to drive top-line growth through eCommerce, specifically targeting an aggressive +40% annual growth in direct-to-consumer digital channels over the next five years. The client also has asked to incorporate organizational considerations (talent, organization, etc.) in the recommendation.

Q.1. What are potential reasons for Recreation Unlimited’s poor eCommerce performance relative to competitors?

Internal factors:
(i) Lack of a clear strategic vision or plan
(ii) Undefined target customer or lack of a plan to understand and target customers and their preferences
(iii) Poor execution resulting in inconsistent customer experiences, inefficient supply chain, or poor fulfillment
(iv) Unclear ownership of work and lack of accountability for results
(v) Lack of awareness of trends and technology in the digital commerce landscape
(vi) Lack of engagement or training for employees
(vii) Increasing turnover within innovation teams

External factors:
(i) Customer preferences for shopping experience or products are changing.
(ii) Competitors are using innovative technology or products to set industry standards and attract customers.
(iii) Employees are finding more innovative work opportunities with competitors.
(iv) Regulatory changes can impact the bottom line.
(v) Macroeconomic trends can impact consumer spending.

Q.2. In order to win digital customers, Recreation Unlimited wants to find ways to improve and differentiate their digital customer experience. What are some potential ways to improve the customer experience and how does improving customer experience create value for the customer and value for the business?

Value to customer:

1. Establish an emotional connection by sharing the brand's story.
2. Provide unique value that cannot be found in other channels, such as exclusive promotions and digital experiences.
3. Create a seamless shopping experience by connecting in-store and digital experiences

Value to business:

1. Encourage brand sharing through earned activities like social media and referrals based on positive web experiences.
2. Boost transactions by increasing total transactions, average spend per visit/transaction, and frequency of visits.
3. Reduce costs by decreasing the number of physical store locations, minimizing returns/exchanges, and lowering acquisition and retention costs in the long term.

Q.3. As part of the digital strategy that Recreation Unlimited is considering, they are debating whether to improve the website experience or increase digital marketing. Since they are not sure they will have the budget for both, they want you to help them decide. How would you approach this question?

As an interview candidate, I would approach this question using a structured framework to evaluate the trade-offs between improving the website experience and increasing digital marketing efforts for Recreation Unlimited. The key elements of this analysis include benefits, costs, timing, and challenges/risks.
1. Benefits:
a. Improved website experience: Enhancing the website can lead to higher conversion rates, increased customer satisfaction, and improved brand perception. Customers are likely to revisit and recommend the website to others, resulting in long-term revenue growth.
b. Increased digital marketing: Investing in digital marketing can increase brand awareness, reach new customers, and drive more traffic to the website. This can result in short-term revenue growth and improved competitive positioning.
2. Costs:
a. Improved website experience: Costs for website improvements may include hiring skilled developers, UX/UI designers, and project managers. These costs may be fixed or ongoing, depending on the scope of the project.
b. Increased digital marketing: Digital marketing costs include ad spend, hiring marketing professionals or agencies, and investing in marketing tools and analytics. These costs are typically variable, as they can be scaled up or down depending on the desired marketing efforts.
3. Timing:
a. Improved website experience: The benefits of an improved website experience may take longer to materialize, as it requires time for customers to discover and engage with the new site. However, once established, these benefits can have long-lasting impacts on the company's digital presence and reputation.
b. Increased digital marketing: Digital marketing efforts can generate immediate results in terms of increased traffic and sales. However, these benefits may be more short-lived, as they depend on the ongoing investment in marketing efforts.
4. Challenges/Risks:
a. Improved website experience: There is a risk that the new website may not be appealing, confusing, or fail to drive additional sales. Additionally, website downtime during the development process can negatively impact sales and customer experience.
b. Increased digital marketing: If the underlying issues on the website are not addressed, increased marketing efforts may not lead to a significant boost in sales. Furthermore, marketing campaigns may not appeal to the target audience, resulting in wasted ad spend and efforts.
c. Talent: If Recreation Unlimited lacks the right talent to execute the digital strategy, the project may not achieve its intended goals. This highlights the need for investment in training and change management programs.
In conclusion, I would recommend conducting a thorough analysis of the current website experience to identify areas of improvement and assess the potential impact on sales and customer satisfaction. Simultaneously, a detailed assessment of the company's digital marketing performance should be conducted to determine the potential for growth and return on investment. By comparing the benefits, costs, timing, and risks associated with each option, Recreation Unlimited can make an informed decision on whether to focus on improving the website experience or increasing digital marketing efforts to achieve their ambitious eCommerce growth targets. 

Q.4. Recreation Unlimited has provided Deloitte with data to help them evaluate the costs and potential opportunity of improving the website. If Recreation Unlimited chooses to improve their website it will cost them $10M (one-time cost), but they expect that each visitor will spend an additional $1. The profit margin on any products purchased on the website is 50%. How would you evaluate the potential opportunity of improving the website? The client has also provided us with the data point they have 20M people visit the site annually.

To evaluate the potential opportunity of improving the website, we will look at the costs and benefits associated with the improvement. The main goal is to increase the top-line growth through eCommerce and drive a 40% annual growth in direct-to-consumer digital channels over the next five years.

Costs:

• One-time cost of website improvement: $10M

Benefits:

• Increase in revenue per visitor: $1
• Profit margin: 50%
• Number of annual website visitors: 20M

To estimate the potential increase in profit, we can first calculate the additional revenue generated through the website improvement:

Additional revenue per year = Increase in revenue per visitor * Number of annual website visitors
= $1 * 20M
= $20M

Since the profit margin is 50%, we can calculate the additional profit generated:

Additional profit per year = Additional revenue per year * Profit margin
= $20M * 0.5
= $10M

Now, we can compare the one-time cost of the website improvement to the additional profit generated per year:
One-time cost: $10M
Additional profit per year: $10M
From this analysis, we can see that the website improvement would pay for itself in one year through the additional profit generated. Furthermore, this additional profit would continue to be generated in subsequent years, potentially supporting the goal of achieving 40% annual growth in direct-to-consumer digital channels over the next five years.

However, it's important to consider other factors such as the impact of the website improvement on customer experience, potential increases in customer retention, and the competitive landscape. Moreover, integrating organizational considerations such as talent and organization structure will also be crucial in implementing the website improvement effectively.

In conclusion, based on the financial analysis, improving the website seems like a promising opportunity to drive top-line growth through eCommerce. However, it's essential to consider other factors and integrate organizational aspects in the recommendation to ensure a comprehensive approach to achieving the desired growth.