Augustin made several assumptions that he did not validate. He bet that:
- young people would be interested in a store as a place to shop and hangout
- young people would spend more at a place with an ethos of honesty
- old people would still spend more at a place that offered no “gimmicky” discounts
- young people will have the means to spend money because of their inexpensive prices
Especially given the fact that Emilia once received 72% of its revenue from discounted items, these assumptions cannot be overlooked. Augustin should have validated each and every one of them with relevant well-designed experience prototypes. If he had realized the nuances of how these assumptions are right (or more probably wrong), Augustin could optimize his new strategy shift and even save money on renovating the stores in the first place. Augustin could have saved 211 million dollars for Emilia.
If I were consulting Augustin I’d recommend reinstating the old discounted models as soon as possible to stop the business’s hemorrhaging. Given the sheer volume of the loss, I might advocate shutting down 10-15% of stores and using the proceeds to revamp Emilia’s online presence so that we could reach more customers. As for Augustin’s vision for “keeping it real” I wouldn’t advise him to scrap it right away, but rather take the time to validate his assumptions. I’d advise him to conduct user interviews and run several experience prototypes before jumping into another bad model.
