Sample

McKinsey · Profitability

E-Commerce Margin Erosion

~28 min

Intermediate

Your interviewer will present a business problem, share exhibits, and ask questions during the conversation.

What to do

Clarify the problem

Structure your analysis

Deliver a clear recommendation

Case Context

Interview

My hypothesis is that the home goods expansion is the primary driver - impacting both gross margin and fulfillment costs.

Exhibit 1: Contribution Margin Bridge

Waterfall chart showing contribution margin changes from 32% in 2023 to 24% in 2024, with breakdowns by category

The waterfall confirms my hypothesis. Product mix and fulfillment are the two biggest drivers of margin decline - both point to home goods as the culprit. I'd like to see the gross margin and fulfillment costs broken down by category to quantify the impact.

The data confirms home goods is the primary margin killer. Let me size the impact: - Home goods is 25% of $2B = $500M revenue - Gross margin gap: 45% - 22% = 23pp - That's roughly $115M in lost margin annually My recommendation: 1. **Short-term**: Raise free shipping thresholds for home goods to offset fulfillment costs 2. **Medium-term**: Exit lowest-margin home goods SKUs 3. **Strategic**: Evaluate whether home goods fits the brand - it may be a distraction from the core apparel business

I'd run a cohort analysis: Do apparel customers who buy home goods have higher LTV? If multi-category customers show 50%+ higher retention, we optimize rather than exit. Data-driven, not assumption-driven.

Results

Skills Progressed

You demonstrated growth in 2 skills

Quantitative Reasoning

Expert

Problem Structuring

Practitioner

Debrief

E-Commerce Margin Erosion

28 min

Structure

Distinctive

Excellent MECE framework with hypothesis-driven approach.

Distinctive

Analytical

Strong

Strong exhibit interpretation and impact sizing.

Strong

Synthesis

Strong

Strong recommendations with clear prioritization.

Strong

Communication

Meeting Bar

Clear and structured throughout.

Meeting Bar

Key takeaway

Quantify the impact of each driver

You correctly sized the $115M gross margin impact. Always translate percentages into dollar terms to show business relevance.

E-Commerce Margin Erosion | Mckinsey Case Interview | MBB Interview

Sample

McKinsey · Profitability

E-Commerce Margin Erosion

~28 min

Intermediate

Your interviewer will present a business problem, share exhibits, and ask questions during the conversation.

What to do

Clarify the problem

Structure your analysis

Deliver a clear recommendation

Case Context

Interview

My hypothesis is that the home goods expansion is the primary driver - impacting both gross margin and fulfillment costs.

Exhibit 1: Contribution Margin Bridge

The waterfall confirms my hypothesis. Product mix and fulfillment are the two biggest drivers of margin decline - both point to home goods as the culprit.

I'd like to see the gross margin and fulfillment costs broken down by category to quantify the impact.

The data confirms home goods is the primary margin killer. Let me size the impact:

Home goods is 25% of $2B = $500M revenue
Gross margin gap: 45% - 22% = 23pp
That's roughly $115M in lost margin annually

My recommendation:

Short-term: Raise free shipping thresholds for home goods to offset fulfillment costs
Medium-term: Exit lowest-margin home goods SKUs
Strategic: Evaluate whether home goods fits the brand - it may be a distraction from the core apparel business

Results