A clothing retailer needs to cut costs by 10% without hurting sales. Where would you look?

A quick check on scope. Is it 10% of all costs including what they pay for the clothes, or 10% of operating costs? And by when? I'd sort the costs into three groups. I've ordered them by how much the customer would notice a cut, starting where they'd notice least. The first group is what they pay for the product. It's the biggest cost, so small gains matter. I'd look at suppliers and at how much gets marked down. The second group is the back end. That's head office, IT, warehouses and shipping. The third group is stores and marketing. That's rent, store staff and advertising. This is where a cut can hurt sales, so I'd be careful. For each idea I'd estimate the saving and the risk to sales, and rank them. Could I see a breakdown of costs by those three groups?

A quick check on scope. Is it 10% of all costs including what they pay for the clothes, or 10% of operating costs? And by when? I'll assume total costs of $1 billion, so we need $100 million, within 18 months. I'd sort the costs into three groups. I've ordered them by how much the customer would notice a cut, starting where they'd notice least. The first group is what they pay for the product. It's the biggest cost, so small gains matter. I'd look at suppliers and at how much gets marked down. For a clothing retailer the product is probably more than half of all costs. With suppliers I'd look at using fewer of them, sourcing countries and fabric choices. Markdowns are the quieter cost. Buying closer to demand means fewer clothes sold at 50% off, which saves money and helps sales. The second group is the back end. That's head office, IT, warehouses and shipping. Customers don't see any of it. I'd benchmark head office cost as a share of sales against peers, and look at freight contracts and the cost of handling online returns. The third group is stores and marketing. That's rent, store staff and advertising. This is where a cut can hurt sales, so I'd be careful. I wouldn't cut evenly. I'd rank stores by profit and look at closing or renegotiating the bottom ones, match staff hours to traffic so busy hours stay covered, and drop the marketing with the weakest return. For each idea I'd estimate the saving and the risk to sales, and rank them. My hypothesis is that product cost and markdowns can deliver more than half of the $100 million, which takes pressure off the stores. I'd start with a cost breakdown and markdown rates by category. Do we have them?