Ans 1.

The differentiating factors is as follows:

The perceived value of a product / apparel for a customer is:

Perceived Value = Price x Quality x Service x Assortment x Facility

So, the differentiators for a physical store will be based on these parameters.

1. Price

The price of the products should be carefully decided keeping in mind the consumers pocket
as well as the companys profit. As per the ABOFs figures, the partner brands account for 53%
of the sales, Own Brands account for 41% of the sales while the external brands account for
6% of the sales. Profit figures for partner brands, own brands, skult are 10%, 20% and 33%
respectively.

Price is a major differentiator as people look for clothes that are of good quality, in-fashion
and suits their pocket. So, there should be backward integration (1 inventory for online and
physical) with the online store i.e. abof.com so as to maintain proper inventory, pricing and
customer base. This is required as the customer base

Usually, people visit the physical store, try the clothes / apparels and order the same online
where they get discounts and home delivery service, so there is a huge need of backward
integration.

2. Quality

The quality of the apparels need to be maintained, be it partner brands, own brands or skult.
People look for good quality clothes. Multiple checks need to done before accepting the lot
to be put up in the store. This means that the item return rate due to issues in quality needs
to minimized further.
3. Service

Create unique in store experience for the customers by installing innovative trial rooms,
personal shopping attendant and enhancing the user experience in the bricks and mortar
store. Additional benefits to loyal customers by issuing loyalty cards in the form of extra
points, discounts and other facilities like

4. Assortment

The physical store needs to have a good inventory of apparels in line with the latest fashion.
Not a very big inventory is suggested as the fashion trends keep changing now and then. Also,
the display of apparels on shelves and mannequins should be stylish and latest in order to
attract customers to the store.

5. Facility

The store should also provide a home delivery option. Many a times, people prefer a certain
product to be delivered to a certain location at a certain time, so this facility should be
available with the physical store. This will be helpful in the case of sending gifts.

Ans 2.

The product mix should be as diverse as possible and the products that are being offered must
complement each other i.e. the full attire or outfit of an individual should be sufficed as well
as the accessories which an individual requires. The Kids section should also be diverse and
be kids and child friendly.

Product Mix

Taking the financials into account

 Parameter
Own Brand Sales
External Brands Sales
Own Brand Sales
External Brands Sales
Own Brand Profit
External Brand Profit
Own Brand Item Return
External Brand Item Return
Value Percentage
Rs. 78 lakhs 41.4% of Total Sales
100 + 10 = Rs. 110 lakhs 58.6% of Total Sales
10117 48.2% of Sales Volume
10000 + 847 = 10847 51.8% of Sales Volume
Rs. 15.6 lakhs 53.9% of Total Profit
10 + 3.3 = Rs. 13.3 lakhs 46.1% of Total Profit
810 8% of Sales
1000 + 60 = 1060 10% + 7%

It can be inferred that even though the revenue for external brands is more than own brands
even though the sales volume is less than the own brands of abof. However, the profit for
own brands is higher.

So, the ideal product mix should be in the ratio of the profits i.e. 15.6:13.3 which means
approximately 53.9% of own brand products and 46.1% of external brands.

The external brands break up: 34.6% partner brands and 11.5% of skult.

The profits can further be increased if the own brands sales increase if the sales of skult and
own brands is increased as their profit margin is higher.

Ans 3.

1. Backward Integration

Since, abof is getting into both bricks and mortar and clicks, backward integration is highly
important for it. Backward integration means inter relating the online store as well as the
physical store, so that the inventory is updated and maintained after each and every
purchase. This will reduce the overall cost by maintaining a single inventory and automatic
updation on each and every purchase. This is a highly recommended step that it needs to take
to generate profits and gain a competitive advantage among its peers.

2. Loyalty Cards

They need to start the system of loyalty cards. The strategy that they can adopt is give loyalty
points for each and every purchase and then allow redemption of the points only on their
own brands, this will enhance sale of their own brands and hence greater profits. This strategy
will keep in mind the customer retention as well as the customer engagement aspect.