Question 1: A general merchandise store in the Yonge and Eglinton area had served as a convenient shopping point for many patrons who were looking to fill time while waiting for appointments or meetings in that area. It carried general merchandise (for example, the assortment you would find in the larger Shoppers Drugmart locations), books and magazines, packaged food items, novelties and gifts, as well as accessories. It also sold coffee and pastries. Their convenient location made it particularly easy to access. It was estimated that a large percent of their sales came from infrequent "drop in" buyers. The construction of the Eglinton subway line unfortunately posed a challenge to the store. Due to construction barriers and sidewalk closures, traffic to the store declined significantly. New estimates suggest that traffic fell to about 50% of the original levels. Construction is expected to last for a few years, so this was not going to be a short-term problem. The store hired an MBA as a consultant. The consultant suggested some ideas to reduce "wasted traffic" (i.e., people that came to the store but did not purchase) and was able to increase conversion rates by about 25%.

a) If the store wants to ensure that there is no decline in revenue compared to pre-construction days, by what percent should the basket size need to increase by? (1.5 points)

b) Since traffic is lower, a general strategy the store should adopt is to increase the VOC (value OF customers). This could imply either increasing the dollars per visit of infrequent customers, or lifetime-dollars of repeat customer. Make three specific recommendations on how the store could achieve this goal and briefly explain how your idea will help. (4.5 points)

c) What could the store do to increase traffic (despite all the inconveniences due to construction)? In a sentence or two, propose one specific strategy and one concrete idea to make that strategy work (or say why an increase in traffic is not possible). (2 points)

Thank you!