How SCHOENEN TORFS achieved staggering results by embracing advanced analytics for end-of-season discounts or markdown pricing.

A price markdown challenge

Schoenen Torfs is a well-established player in the Belgian retail industry and perceived as a frontrunner by many.

Having regularly won prizes as a 'great place to work', the company is eager to embrace innovation but not without losing track of the human factor. Yet, it is not blind for any challenges the organization faces when it comes to profitability.

That such profitability is under pressure is no secret. It is a clear-cut given for any shoe retailer having to cope with new market entrants of the likes of Zalando & Amazon.

Deciding on end-of-season discounts (markdown pricing) was performed using a traditional process, that proved ample opportunity for improvement using advanced analytics.

Torfs invited us to challenge its current way of performing end-of-season discounting or deciding on so called 'price markdowns'.

Yet, with one caveat. We needed to prove the business case of working with advanced analytics to improve its summer sales season results.

A proof-of-concept to prove the business case.

That is why during the 2020 Summer Sales, we set up a proof-of-concept of the Crunch Analytics Markdown Optimization Assistant to prove that our algorithm-driven toolkit could outperform a human decision-maker setting end-of-season discounts.

By introducing the proper tooling, the team could increase revenue and margins while reducing the time spent on the entire process of setting end-of-season discounts.

The markdown optimization solution is used both before and during the sales season. The tool suggests the proper price markdown for every item in your catalog. An optimal discount that should sell the item out just in time while generating more revenue and a higher margin.

Before the start of the sales season, the team can verify strategic scenarios and their impact across different categories, channels & countries. They can share the info to better plan and prepare promotional efforts, ensuring that marketing efforts generate even more traction during the upcoming sales season.

During the season, the tool enables these same teams to adjust a chosen strategy and adapt selected markdown levels based on real-time performance and analysis.

Moreover, the tool helps to decide what level of impulse is needed without sacrificing too much margin. Or it can even prevent the team from applying a general markdown to an item that will clearly sell out in just time without any discount.

How successful was it?

During the 2020 summer sales, the test case demonstrated that products for which this algorithm controlled the price had a 30% higher revenue on average, creating an 8% margin increase.

The client was, of course, pleasantly surprised by the achieved results in a proof-of-concept setup. The fact that we were able to prove the business case made it much easier for the team at Torfs to proceed with a full implementation of Markdown Optimization Assistant.