Industry primers: retail, consumer goods, banking, telecom
How each industry makes money, the numbers it watches, and the case questions you are likely to meet.
Key takeaways
- Before you structure a case in an unfamiliar industry, ask yourself three things: how does this business make money, what are its biggest costs, and which two or three numbers does it watch most closely.
- Like-for-like sales compare only stores that were open in both periods, so new stores do not hide a decline.
- Net interest income is the gap between what the bank earns on loans and what it pays to depositors.
Key idea
Before you structure a case in an unfamiliar industry, ask yourself three things: how does this business make money, what are its biggest costs, and which two or three numbers does it watch most closely.
| Topic | Details |
|---|---|
| How it makes money | Buys goods and sells them at a higher price. Revenue = number of stores x sales per store, or visitors x conversion x average basket. |
| Biggest costs | Goods bought (COGS), staff, rent, logistics, and for online: delivery and returns |
| Key metrics | Like-for-like sales (stores open a year or more), sales per square metre, average basket (AOV), number of visitors and conversion, gross margin, inventory turnover |
| Typical case questions | Why are profits falling at a supermarket chain? Should we open more stores or grow online? How do we reduce returns? |
| Regional example | A grocery chain in India with thin margins of a few percent, where store rent and fresh-food waste decide profit (INR) |
So-what
Retail margins are thin, so small changes in waste, rent, or basket size move profit a lot.
| Topic | Details |
|---|---|
| How it makes money | Makes branded products and sells them mostly through retailers and distributors, not directly to shoppers. Revenue = volume x price after discounts to retailers. |
| Biggest costs | Raw materials and packaging, manufacturing, marketing and brand spend, discounts and promotions paid to retailers |
| Key metrics | Market share, distribution (share of stores that stock the product), volume and price growth, gross margin, marketing spend as a share of revenue |
| Typical case questions | Should we launch in a new country? Why is our share falling? Should we sell smaller packs at a lower price? |
| Regional example | Small, low-price packs (sachets) of shampoo or coffee are common in India and Southeast Asia to reach shoppers with little cash at a time |
So-what
Consumer goods companies win through distribution and brand. A great product that is not on the shelf does not sell.
| Topic | Details |
|---|---|
| How it makes money | Lends money at a higher interest rate than it pays on deposits (net interest income), plus fees for cards, payments, and advice |
| Biggest costs | Staff, branches, technology, and loans that are not repaid (credit losses) |
| Key metrics | Net interest margin (interest earned minus interest paid, as a share of loans and other interest-earning assets), cost-to-income ratio (operating costs divided by income), loan losses, deposit growth, return on equity (profit divided by the owners' capital) |
| Typical case questions | Should we close branches and move customers to digital? How do we compete with a new digital bank? Why is our margin falling as interest rates change? |
| Regional example | Islamic banks in the Gulf and Malaysia do not charge interest. They earn mainly through trade-based contracts (buying an asset and selling it to the customer at an agreed cost plus profit) and leasing, plus some profit-sharing |
So-what
A bank's profit depends heavily on interest rates and on how many loans go bad.
| Topic | Details |
|---|---|
| How it makes money | Monthly subscriptions and prepaid top-ups for mobile data, calls, and home broadband. Revenue = subscribers x average revenue per user (ARPU). |
| Biggest costs | Building and running the network (very high fixed costs), spectrum licences, customer acquisition, and handset subsidies |
| Key metrics | Subscribers, ARPU, churn (customers leaving each month), capital spending as a share of revenue, network coverage |
| Typical case questions | Should we invest in 5G? How do we reduce churn? How should we price data plans? |
| Regional example | Mobile ARPU in India is much lower than in the US or the Gulf, so Indian operators need very large subscriber numbers |
So-what
With high fixed costs, telecom is about scale and keeping customers: churn is expensive.
A mobile operator in Indonesia has 40 million subscribers with an ARPU of IDR 40,000 a month. What is its monthly revenue in IDR billions? (1 billion = 1,000 million.)
A retailer's total sales grew only because it opened new stores. Which metric shows how existing stores performed?
What is a bank's net interest income?
Why does churn matter so much in telecom?
Sources for this lesson (1)
- Recognized public explanations of case-interview concepts and frameworks
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