We Created a Unique 2020 Summer Sales Markdown Tool. Here Is How It Works

What is the objective of the tool?

With this 2020 Summer Sales Markdown tool we wanted to create a tool that provides significant benefits for both the retail organization as well as the person or team tasked with setting the right markdown.

"Safeguarding the cash position for the months to come". That is the main priority for many retailer. That means squeezing as much value as possible out of the current seasonal inventory, optimized over the entire season.

It is done by setting the appropriate markdown, ramping up marketing effort for specific items and analyzing sales performance. Every single week, hit repeat. By the people from category management over to marketing & sales.

This easy-to-introduce tool will help a retailer do just that, with data & algorithms hinting the right direction to follow.

What kind of tool are we talking about?

The tool is in essence a combination of a custom algorithm, fuelled by your retail data brought together in an appropriate location, and a number of dashboards that visualize both insights, predictions and actions to undertake. All focused at the process of setting the right markdowns, for each item, every single week.

A Power BI Dashboard

We created an easy-to-introduce tool that functions in a familiar Microsoft environment. So, no huge infrastructural costs or need to educate people in working with exotic computer systems.

Data & custom algorithms

Our custom algorithms run in the background, learning from the retailer's specific datasets. The data is automatically brought together, so no manual transfer from one system to the other is required.

What does the tool look like?

The tool, in essence, consist out of three interactive Power BI dashboards. We listened carefully to category & purchase managers to understand their workflow in order to build a tool that assist them accordingly. Read on to see how these dashboards can be used.

SNEAK PREVIEW: watch a introductory product tour right here:

How will the person setting the right markdowns use the tool?

Step One: Gathering the data.

The tool is automatically fed by an extract of the ERP-system. There is no more need to manually copy/paste numbers from one format to another.

Step Two: Basic insights in previous performance

A Category Manager often has the habit of first creating insights into last weeks performance.

The tool’s first set of dashboards therefore automatically generates insights on the basics. Such include rotation, inventory, price and markdowns on a product level. Not for a few products, but for all of them. And without having to manually calculate anything, eliminating errors that might occur.

It provides a high-level strategy overview for the category manager, enabling him/her to get a better understanding of the current situation. Whether the actions the company has taken are adding or destroying value, and verify nothing out of the ordinary is occurring.

Moreover, such helps the Category Manager in creating a weekly update or in answering questions brought forward by other business units and/ or the company management. In essence, helping them to understand how sales are evolving.

Step Three: What is the exact markdown I should apply at a given moment in time?

The main goal in markdown management is ensuring that the most optimal markdown is set for each product at any point in time in order to maximize generated revenue and margin. This is done by balancing markdowns, so they are not set too high (missing out margin), or too low (missing out on revenue).

That is why the tool we built is able to indicate where markdowns are appropriate, predict what the exact markdown should be, and indicate the turnover one can expect from the that given markdown.

Today, such is more of a challenge than ever before.

• Manually setting markdowns based on key metrics and experience is not possible, as no one understand the dynamics of this unpreceded situation;
• Standard supporting tools are failing as they are based on historic data. Such historic data is not reflecting current dynamics Supporting tools built for this specific situation mainly focus on continuous learning and high responsiveness.

The tool we created is able to suggest the appropriate markdowns, taking into account the current situation and the company-specific business rules. The algorithms it applies are adapted to consider the current complex and dynamic environment we - today - are living in.

So, here it how it does it.

First it indicates what items require a change in pricing, using markdowns. In a clear overview the tool pinpoints the products which have been rotating slowly and of which inventory levels remain high. It shows the current markdown and suggest the optimal markdown to apply, taking into account company-specific business rules. Moreover, it clearly emphasizes the value the organization might be raking in.

Given the fact that the time a category manager can spend on markdown management is limited & therefore precious, the tool presents that person with prioritized opportunities and a clear indication of what actions could be taken.

The category manager can move forward at will. The tool is merely there to assist in a difficult and time-sensitive task that needs to be performed in limited time, week-over-week.

It allows that manager to focus on more strategic decision-making or other activities he or she might be tasked with in a current period of peril.

Step Four. A final overview of next week's’ actions & impact

As the category manager accepts or declines the suggested list of markdowns, a final overview is made. This again simplifies the task of the Category Manager in informing other business units and/ or the company management of what the next week will have in store.

Get in touch

This tool did not appear out of thin air. These past few years, we've gained a lot of experience with the markdown process in retail.

In 2019, we were able to assist a fashion retailer secure an overall margin increase of more than 4% in comparison with the old markdown process. Moreover, that team was looking at a 50% reduction in time spent.

With this tool, we’re convinced that we can help out any seasonal retailer for the months to come.

Book your personal demo & see how it can work for your organization!