THELM EA GROUP

Information Technology Medium difficulty

Retail Interviewer-led case

This case focuses on solving a technology challenge for an e-commerce fashion player in order to
generate improvements in conversion. The case tests all elements of the case interview scorecard
except creativity.

This case is only suitable for candidates applying to digital or technology-focused roles as it includes
several Information Technology expertise questions that cannot be skipped.

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Problem definition
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Your client is the e-commerce division of Thelmea Group, a mid-size apparel retailer with a longstanding
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bricks & mortar retail estate as well as a growing online business.

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Thelmea have a long history in retail, and began their shift into online just over fifteen years ago. The
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transition has been relatively successful, and today about 30% of the group’s annual sales come from its
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e-commerce division. However, in the past two years the firm’s online growth has slowed down. A large
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number of marketing and pricing initiatives have been rolled out, with good results in sales and user
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growth, but the client believes the “low hanging fruit” here is now gone.
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The Head of e-commerce believes the limiting factor for Thelmea’s growth is now technology. In
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particular, she has data to suggest that Thelmea’s website conversion rates are below industry standard,
and wants to explore the drivers of this.

How might Thelmea’s technology be holding back its on-site conversion, and how can the client
turn the situation around?

Additional information
At this stage of the case the specific cause of the technology challenge is unknown, but further details
will be shared later on.

If asked at this stage or later, please share that:

• The focus of the problem should be squarely on technology limitations. Conventional “commercial”
levers (e.g. pricing, retail assortment) have been explored and are not considered a problem by the

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 client
• The firm’s IT infrastructure has grown unevenly, and is a mix of a legacy IT estate and more recent
technologies
• The online conversion challenge is observed generally across the website, rather than at any single
point in the on-site journey (e.g. product page, basket page)
• Thelmea is a European company but has a global footprint, with online customers in North America,
South America, Europe, and Asia

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Question 1 (Structuring)

How would you go about structuring this problem?

Guidance for interviewer

Candidates should be careful to focus on technology issues specifically, not on broader business issues.
If a candidate misses this, steer them back to focus on technology in their structure.

Within the topic of technology problems, a wide array of potential drivers can be considered as in scope
at this stage, from back-end infrastructure to the front-end user experience.

Possible answer

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1. On-site factors affecting conversion:

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Loading speed
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Bugs
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• Navigation and journey

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• Product merchandising
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• On-site customization
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Overall design
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2. Off-site factors affecting conversion:

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• CRM back end (e.g., purchase history)

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Customized email outreach

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• Retargeting advertising campaigns

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Question 2 (Judgement & Insight)
The client team have recently gathered some data on conversion rates and website performance. They
have included the results of this in the following performance report (share Exhibit 1).

What does this information tell you about the client’s conversion challenge?

Guidance for interviewer

Candidates will typically identify clear trends such as increased sales during peak periods and reduced
conversion rates on weekends. Strong candidates will take this a step further to identify the correlation
between reduced conversion and high demand and will generate hypotheses on potential causes for
this.

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If asked, please share that:
• “Peak week” values represent the average of the 10 highest selling weeks of the year, typically

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between Black Friday and the New Year. “Standard week” values reflect the average of the

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remaining 42 weeks of the year
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• Average basket values are $97, and are stable throughout the year. Customers buy more frequently
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in peak periods, but basket values do not on average change

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• The “conversion rate” here reflects conversion to sale for any customer landing on the site. Data on
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specific conversion rate per step in the customer journey is not available at this stage
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Possible answer
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We can see that the client’s business is highly seasonal: peak weeks generate ~3X the sales of standard
weeks. However, conversion rates are at their lowest during the periods of highest demand: weekends of
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peak weeks. The lower conversion here likely reflects a significant missed opportunity for the client.
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Lower conversion rates seem to be correlated with slower page-load speeds: we can see that conversion
drops as page-load speeds increase, in both peak and non-peak periods. This suggests that slow page-
load times are turning away customers.

Slow page-load times in turn seem correlated with periods of high sales activity. This suggests that the
client’s infrastructure is struggling to deal with high traffic volumes, and slows down as web traffic
increases. We should investigate what may be constraining page-load times at these volumes in order to
turn the situation around. We should however be careful to check that there are not confounding
variables here – it’s possible other factors could be driving low conversion on peak days, independent of
slow site loading times.

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Exhibit 1: Thelmea: Average site performance per day of the week

Standard weeks Peak weeks

Avg. page Avg. page

Conversion Conversion load time
Day of week Sales (USD) load time Sales (USD)
rate (%) rate (%) (sec)
(sec)

Monday $377,143 1.11% 0.27 $1,056,000 0.91% 0.65

Tuesday $300,000 1.08% 0.22 $840,000 0.90% 0.63

Wednesday $394,286 1.08% 0.28 $1,104,000 0.92% 0.64

Thursday $471,429 1.09% 0.35 $1,320,000 0.89% 0.69

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Friday $771,429 1.01% 0.52 $2,160,000 0.59% 1.23

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Saturday $1,028,571 0.91% 0.62 $2,880,000 0.45% 1.37

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Sunday $942,857
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0.93% 0.59 $2,640,000 0.50% 1.28
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Total $4,285,714 $12,000,000

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Question 3 (Numeracy)

A recent report by Thelmea’s research team showed that bringing average page load times below 0.7
seconds could lead to a 0.9% conversion rate for “peak” Fridays, Saturdays, and Sundays.

If Thelmea could reach this conversion rate, how much incremental revenue would the change
generate per year?

Guidance for interviewer

While there may be further opportunity (e.g. non-peak weekends), the calculation here should focus on
peak weekend periods exclusively.

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As an optional follow-up, candidates can be asked to calculate how large a % increase the change
reflects compared to the client’s current annual revenue. Today’s annual revenue can be calculated from

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data in Exhibit 1.

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Possible answer
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We can see that conversion rate is around ~0.5% on “peak” days at present. Reaching a conversion rate of
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0.9% would therefore reflect an 80% increase from today’s sales figures.
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To estimate the potential increase in revenue from improved conversion rates, we will run the following two
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calculations:
• Revenue increase = [New Revenue – Old Revenue]
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• New Revenue = [Old Revenue X 1.8]

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The current weekly revenue on peak days is ~$7.7m (2.16 + 2.88 + 2.64). The expected revenue with higher
conversion will be ~$13.9m ($7.7 X 1.8).

Taking these together, the revenue improvement would reflect ~$6.2m per week ($13.9m - $7.7m). Over the
10 weeks of the peak period, this would reflect an annual revenue increase of $62m.

This increase is significant, and represents a ~20% boost in the client’s current annual revenue. Even quite a
large investment to resolve the conversion challenge could be justified, given the scale of this potential
benefit.

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Question 4 (Information Technology expertise question)

Thelmea run their infrastructure on their own on-premise servers. These servers are in three locations:
France, Italy, and the USA.

The client has provided the following data on their server locations, their respective response times, and
shifts in site visitor volumes by location. (Share Exhibits 2 and 3.)

Based on these exhibits, what steps could the client take to improve the loading times of its
website?

Guidance for interviewer

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The key insights in the exhibits are that Thelmea is likely server capacity constrained, and that it has a

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mismatch between the location of its user growth and that of its servers. These insights can and should

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be reached by eyeballing the exhibits rather than running detailed calculations.

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Candidates should be encouraged to focus on solutions to these challenges, which will focus on a
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combination of improvements to capacity and response time.

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If a candidate asks, please share that:

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• Thelmea’s servers are entirely hosted on-premise, and managed by the client directly. The client has
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not added significant server capacity over the past three years
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• The focus on European locations reflects the firm’s heritage: Thelmea was operating in Europe
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exclusively for much of its history, and its infrastructure reflects this
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The client has noticed a marked drop in its page response times over this 3-year period
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Possible answer

Thelmea seems to have both a capacity and a response time challenge in its server estate.

With regard to capacity, the client has seen marked growth in web traffic over the past three years (by
~65%). This growth in site visits has likely driven a corresponding increase in page load times, as server
capacity becomes more constrained. Not only is this a challenge now, but it’ll present a drag on future
growth for the client as it scales its online business.

Thelmea’s site visits are also increasingly mismatched with its server locations. Asia generates ~15% of
traffic, but has no server capacity. North America generates ~35% of the traffic, but only has 25% of server
capacity. Without server capacity, users are redirected to far-flung locations and may experience slow load
times as a result.

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The client can take actions to address both of these challenges. For improved server capacity, Thelmea can
consider a number of options, depending on where the challenge lies:
• Increasing the compute power on its existing server estate (e.g. adding more CPU cores in each
location)
• Increasing network bandwidth into and out of its current server estate
• Changes to software, in order to minimize the number of server requests for any given user action

To improve response time, Thelmea might consider adding entirely new servers in the fastest-growing
locations: North America and Asia. If this is not feasible quickly, a relatively quick win could be to set up a
content-delivery network to serve cached pages throughout the world, minimizing the load on the client’s
server estate.

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The above solutions refer to changes to Thelmea’s existing estate, but a broader question of technology

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strategy should be whether to move the firm’s entire server infrastructure to the cloud. This would solve for

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both of the above challenges, allowing the client to quickly scale-up in response to demand as well as to
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enable connections close to customer locations.
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Exhibit 2: Site visit numbers (million visits), Year 1 and Year 3 (last year)

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Exhibit 3: Thelmea’s IT server locations and performance

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Average server response time (milliseconds)

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Capacity
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Server locations (simultaneous Europe North America Asia

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users)
Lyon, France 13,300 225 650 828
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Pisa, Italy 7,900 320 960 925

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Chicago, USA 6,650 765 260 1050

Puzzled by some case interview charts?

Practice on your own with the Exhibit Drills in the

Interview Prep Course

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Question 5 (Information Technology expertise question)

Based on the previous analysis, the client is considering a shift of its infrastructure into the cloud, most
likely by partnering with a major cloud vendor.

What are some of the advantages and potential challenges of a move to the cloud? Is this change
likely to be a good move for the client?

Guidance for interviewer

This question requires candidates to think in an open-ended way about potential opportunities and
difficulties with a move to the cloud. Detailed knowledge of cloud infrastructure is not expected, but
candidates should show creative thinking and thoughtfulness on potential issues that may exist.

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The question on whether to go ahead with the move should be based on a candidate’s judgement alone,

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and there is no “right” answer to it at this stage.

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Possible answer
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Thelmea could realize several potential benefits by moving its infrastructure to the cloud:
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• Stable performance: Good cloud-hosting providers usually have dedicated and experienced
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personnel to ensure that the hosted websites will retain optimal performance through traffic spikes
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and internet connectivity changes.

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Reliability and security: Cloud providers typically provide additional protection by monitoring and
preventing security threads. In addition, cloud providers will offer multiple servers in many locations.
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The built-in redundancy this provides will likely give the client improved reliability and risk reduction
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Less effort to maintain: By moving infrastructure to cloud-hosted providers, the client will not need to
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dedicate time and resources to monitor, maintain and upgrade the servers
• Ability to scale easily: Most established cloud-based IT infrastructure providers have significant
capacity built up to serve their users. As such, Thelmea will be able to easily scale its business and
website traffic based on demand in the future, without having to invest in substantial fixed cost
upfront in order to expand its IT capacity
• Access to talent: Having a more modern, cloud-based architecture will likely help the client in
attracting top technical talent

The potential downsides of moving to cloud-based solutions are:

• Potentially higher cost: Whilst the upfront cost of cloud-based IT infrastructure may be low, the cost
is usually billed on a volume-basis, and may add up over time

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 • Dependency on provider: In a cloud-hosted set up, any changes and upgrades are at the discretion
of the provider; as such, this may not allow the client to easily and swiftly make updates to its
websites and payment processes

Ultimately the decision on whether the client should move its IT infrastructure into the cloud should be based
on business needs an and assessment of the client’s own capabilities. Given the client’s high online growth
ambitions and its global reach in particular, however, a shift to the cloud does seem sensible. Managing its
estate in-house may prove cumbersome in response to changing traffic demands.

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Question 6 (Synthesis)

What is your overall recommendation at this stage?

Possible answer

We were asked by Thelmea’s e-commerce team to explore what could be holding back on-site conversion,
and how to turn the situation around.

On-site conversion appears to be held back by slow page-loading times, which are in turn driven by a
mismatch between Thelmea’s traffic and server capacity. The client has a fairly inflexible on-premise server
estate, which is based primarily in Europe. However, its online demand is growing quickly, and mostly from
North America and Asia. The combination of this capacity and location mismatch is driving both capacity and

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latency challenges.

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We explored a number of solutions for the client to boost capacity and reduce latency, including the
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development of more on-premise server capacity. However, I recommend that the client explore a shift
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towards cloud infrastructure in order to solve its challenges and to maximize its flexibility in response to
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future demand. By solving this infrastructure challenge and improving page-load times, we found that the
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client could realize $62m sales benefits annually.

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As a next step, the client should review the decision to migrate to the cloud in more detail, and explore
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potential cloud provider options.

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