Recreation Unlimited

Recreation Unlimited is a global apparel and sportswear company facing declining market share. They are seeking to improve their digital customer experience and understand broader organizational impacts of change.

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

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.

Question 1 What are potential reasons for Recreation Unlimited’s poor eCommerce performance relative to competitors? Example answer: Internal factors: Lack of strategic vision or plan No defined target customer or lack of plan to understand and target customers and their preferences Poor execution (e.g. inconsistent customer experiences, inefficient supply chain, poor fulfillment) Unclear ownership of work and results Lack of awareness of trends and technology in digital commerce Lack of engagement or training across employees Increasing turnover across innovation teams External factors: Changing customer preferences for shopping experience and/or products Competitors setting industry standards and attracting customers through innovative technology or products Employees finding more innovative work opportunities with competitors Regulatory changes impacting the bottom line Macroeconomic trends impacting consumer spending Question 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? Example answer: Value to customer: Develop emotional connection (e.g. opportunity to tell the story of the brand) Differentiate and add value not available through other channels (e.g. promotions, digital experiences) Seamlessly connect channel experiences (e.g. connect in-store and digital experience to make shopping and purchasing a seamless experience) Value to business: Promote sharing of the brand (e.g. earned activity such as social media, referrals of brand to others based on web experience) Increase transactions (e.g. total transaction, spend per visit/transaction, frequency of visits, etc.) Lower costs (e.g. reduction in # of brick-and-mortar locations, fewer returns/exchanges, reduced acquisition and retentions costs in long-run) Question 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? Example answer: You may apply different frameworks, however, key elements for how to find solutions should include: Benefits (e.g. profit vs. revenue, brand name, competitive positioning) Costs (e.g. fixed vs. variable (upfront vs. ongoing), marginal costs Timing (e.g. short term vs. long term benefits, ROI) Challenges / risks (e.g. website – isn’t appealing, confusing, doesn’t drive additional sales, down time; marketing – doesn’t fix underlying issues on website, may not appeal to target consumers; talent – if Recreation Unlimited doesn’t have the right talent, and they are not trained to deliver this, the project will not accomplish its intended goal; there also needs to be a change management program associated with this project) Question 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. Example answer: Calculation A: Contribution is the case influx generated by the additional visitors and spending. It does not account for the profit margin on products sold. Calculation B: Includes profit margin and is the actual profit generated. Question 5: What are the people and organizational implications of implementing the proposed strategies? Example answer: Change management strategy and implementation: Analysis (e.g. change and stakeholder impact analysis, training analysis, communications analysis, and change readiness assessment) Design (e.g. training strategy and plan, communications strategy and plan, change agent network, and leadership alignment labs) Implement and measure (e.g. align the timing of training program with the rollout of new platforms, ensure consistent messaging top down, work with the change agent network to get continuous feedback on the progress and train other employees) Talent and organizational structure: Evaluate current talent and operating model Develop a point of view on how to create a new team focused on rapid innovation Assess current skillset at the organization and identify gaps Develop a plan to upskill talent at the organization, as well as a recruiting program to bring in employees to the new team