MATE CASE

The company MATE markets a line of women's clothing through a network of stores in France, most of which are located in town centers or major shopping centers. The collections are designed at MATE headquarters and the manufacturing is outsourced abroad. A centralized purchasing department is responsible for selecting suppliers, negotiating prices and supplying the stores.

The stores are owned by the company and the staff are salaried employees. The mission of a store is defined as follows: "To ensure the sale of collections through a dynamic approach to promotion and a good development of the products".

Each store manager's performance is evaluated on the basis of a gross margin calculated as follows:

Store net sales

- actual cost of goods sold

- store operating costs

- discounts and rebates during sales period and value of stolen goods

- depreciation costs for work carried out in the store

= store gross margin.

Every month, the central controlling department consolidates the different information required to calculate the gross margin per store. It produces a summary report where the performance of every store is compared by examining its respective gross margins and gross margin rate. A store's gross margin rate is equal to the ratio of the store's gross margin to its net sales. Each store receives this summary report and can relate its performance to that of other stores. Excerpts of interviews of store managers and of other managers about this controlling system, are recorded below:

Manager of the Svres-Babylone store:

"It is clear that one of our priorities is to increase turnover. Our system does not allow us to know whether the increase in turnover is linked to a higher number of customers and therefore sales or whether it is due to an increase in the average basket, i.e. the average turnover achieved with each customer. Indeed, the increase in the number of purchase acts can either come from an increase in the number of customers in the store or from the increase in the average basket - which is generally the result of the performance of our saleswomen. Indeed, our stores are located in high-traffic areas. Most potential customers do not have specific ideas or needs when they enter the store. However, the customer will be inclined to "let herself be tempted" as we offer fashion items at affordable prices. The quality of the in-store animation and customer advice process will therefore be a determining parameter. In particular, it can be a good approach as soon as the customer has chosen an article to orient her towards coordinates (associated articles when establishing the collection: for example, such a skirt would be great with such a top) ....

Manager of the Madeleine store

"A parameter which we can influence is the quality of the presentation of our windows. It's important to know which items should be displayed, which ones will catch the customer's eye, which ones will make her want to come back home .... I feel that headquarters doesn't pay enough attention to the efforts

I make to be creative in my displays."

Bercy store manager

"My team has to keep an eye on everything, especially if we want to reduce the importance of stolen or lost items. It'd be interesting to find out what the markdown rate is in other stores and how the ones that are doing best are doing."

Rivoli store manager

"It would be nice to know every week which products work best. The store's restocking is automatic so

I don't have to worry about it. The cash registers are connected to a central system, so the purchasing department knows in real time what items to restock. But, personally, I don't have detailed information available. I would appreciate having regular information regarding the level of my sales. With accurate information, I would then be able to mobilize my team to try to reverse a situation."

Purchasing Department manager

"Discounts granted in stores, particularly during sales periods, are decided centrally by my department to ensure price consistency in the whole network of stores. We use big data and market price sensitivity to set these amounts."

Managing Director of MATE

"I'm not sure that the stores' gross margin, as calculated today, really reflects the store manager's span of responsibility. I'm not sure that store managers have the most useful information for the management of their stores. And finally, I am not sure that I have all the relevant information at my level. For example, one of the problems with our store reporting system is the following: I don't know how much of the increase in sales is due to growth in specific stores. I would need to know if on one hand, at constant surface area, the turnover increases and if, on the other hand, there is an increase in sales due to the increase in surface area. This type of information would also be useful for store managers... Store managers play a key role in controlling personnel costs. They need to adjust store personnel at peak times (for example, Saturday afternoons) to ensure quality service. They also need to avoid having an excess of staff at off-peak times .... I would also like them to behave more as ambassadors of the brand and not only as manager of their own store."

Questions (40 points for 40 minutes)

1.According to the case, are stores currently considered as cost, revenue, profit or investment centers? Explain (4 points)

2.Should the store performance and its manager's performance be measured using the same indicator? Explain. (4 points)

3.What are the key success factors driving sales in a store (i.e. what explain sales?) (4 points)

4.Why is the gross margin a poor indicator for a store's manager? (8 points)

5.Based on the interview extracts, draw up an O/VA (Objectives-Variables of Action) grid of a store manager (i.e. a grid connecting his objectives with his action variables). If you prefer, you can draw his strategic map (12 points)

6.Propose the indicators corresponding to these objectives and action variables (or to the different categories of the strategic map) (8 points)