Markdown Optimization

Retalon’s Markdown Optimization Module monitors a range of critical variables such as current levels of inventory, sales velocity, past & future events, compares projected performance with business goals/objectives, and uses a set of rules and triggers to automatically recommend optimal price adjustments.

SUPPORTS MULTIPLE PRODUCT PRICE GOALS

Manage prices through the product life cycles based on corporate goals. For example, maximizing gross margin, maximizing sales revenue, or reducing inventory to a certain level (e.g. get rid of inventory by a certain date)

Store/SKU Specific Markdown Strategies

Retalon intelligently identifies what drives the sales of each Store/SKU to build the optimal markdown strategy resulting in improved accuracy and profitability.

MARKDOWNS INTEGRATED WITH INVENTORY MANAGEMENT

Users are able to set triggers based on inventory indicators, and price changes account for product performance, available inventory, and inventory levels of similar products automatically.

Markdown Simulations

Users can run multiple ``what if`` scenerios and review proposed markdowns by projected added profit

Powered by Predictive Analytics

Accounts for Retalon's accurate demand forecast, seasonality, price elasticity of demand, lost sales, events and many other influencing variables

End-to-End Integration

All Retalon solutions are fully integrated in a common predictive analytics platform.

RETAIL CHALLENGE

 

Pricing has increasingly become more reactive than proactive, leaving many retailers struggling to achieve profitable margins.

How to know when is the best time to mark product down?
What products are elastic to markdown?
What is the best markdown strategy to achieve the inventory reduction goal with maximum profit?

 

RETALON SOLUTION

 

Based on criteria set by user Retalon FORETUNE automatically accounts for any applicable product attributes, seasonality, cannibalization, sales level, inventory standing, corporate policies, constrains and competitive prices. This allows the system to suggest the best price each time, consistently, automatically, and with high accuracy.

A few things to keep in mind when optimizing markdown strategies:

 

  • Analysing numerous prices across diverse retail business segments, Retalon statistics shows that in about 40% of cases demand of products depends on price changes (markdown); demand for another 40% of products heavily depends on actual today’s price, and the remaining 20% of products are not price elastic. The foundation of this analysis is ability to accurately forecast baseline demand.

 

  • It is not feasible to markdown one style/color at 31% and another by 28%. It would look strange if a product is sold at the price of $193.62. The price of $201.02 is about the same as $199.95, but psychologically accepted very differently by the consumers. Moreover, if an online shoppers looking for a product within the $200 range, the product priced at $201.02 will simply not appear on the screen. After the price changes are calculated, the Retalon Optimal Markdown System would bring the prices to more consumable shape and form, based on business rules and policies selected.

 

  • Since scenario is usually set at a higher than SKU level (e.g. class), different products (or styles) can end-up obtaining different price change recommendations required to achieve the goal. If for example, the goal is to sell off seasonal merchandised before the end of the season, some styles may require markdown, whether some other well may be sold at the current price before the end of the season. It depends on the corresponding inventory levels and the projected rate of sales. In some cases, the styles with lower inventory on-hand may be completely sold at a higher that current price with much higher margin. In this case the system will indicate this option for users as well.

 

  • Each markdown lead to lost profit. Before taking a deep markdown make sure you have tried the following:
    • Re-balance slow moving inventory to the locations that can sell the product at today’s price (Retalon offers Inter-store Inventory and Assortment Balancing solution for this purpose)
    • Find the optimal time for markdown or a sequence of markdowns.

 

  • Matching lowest price is a dangerous strategy. You don’t necessary have to sell more product to make more money. There is an optimal price point when the quantity of product sold at this price will maximize your gross margin.

 

  • Last minute deep markdowns damage your business in multiple ways:
    • You are losing profit (sometimes even selling products below their true resulting cost)
    • You create an impression that your products were hugely overprice initially.
    • Your customers will now wait for the similar deal each time
    • It would be very difficult to return to the regular price level next season
    • It becomes a ‘normal’ practice in your organization. Your planners will now plan this markdown for the next year, instead of adjusting the SOQs
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