We Created a Unique Markdown Tool for the 2020 Summer Sales Season. Here Is How It Can Make All the Difference.

The next couple of months are crucial for any seasonal retailer. Inventory piling up is the next threat that endangers the continuity of the organization. Each retailer will focus on squeezing as much value as possible out of sales during the 2020 Summer Sales Season.

However, the unsettling news is that last years methods to set the right markdown or discount won't work as expected during this decisive period. That is why we decided to create a summer 2020-specific tool, that can make a difference up to 5% in total revenue.

Directing focus on sales again

Let's rekindle the attention to sales again. Customers showed reluctance to ‘being a customer’ in March & April. They were mainly focused on scrambling to deal with the situation, self-preservation and finding answers on what will be next.

It resulted in a decrease in overall sales, with especially non-essential seasonal goods piling up. And the subsequent looming threat of unsold inventory that might become worthless.

With physical stores reopening, the sign has been given to becoming a customer again. The sign has been given to clear those spring inventories and safe as much cash possible to prepare for the upcoming season’s.

So, how are retailers going to draw customer's attention?

By ramping up the marketing effort and the ultimate recipe of introducing markdowns on seasonal goods.

How will last years' sales recipes perform during the 2020 sales season?

The next weeks & months, retailers will focus on the recipes they know best such as ramping up the marketing effort and introducing markdowns on seasonal goods.

How will especially this last recipes perform?

The ultimate recipe: markdowns on seasonal goods

This recipe is one where we see a lot of room for progress.

Only a limited number of retailers of seasonal goods have embraced advanced methods to deal with setting the right markdown for every item that is about to leave their assortment.

Lot’s of retailers stick to a more basic, traditional method, often performed by the category manager or the person in charge of purchasing. It is done by calculating some basic summary statistics and following some rules of thumb that allow for a good decision.

We are talking about things like estimated stock, stock rotation, speed changes in rotation, etc., and also a lot of common sense and knowledge about the product and how it will respond or will not respond in a given market.

This markdown recipe is of the utmost importance. A lot of retails’ cash right now is locked in inventory that might not sell at a later date. Cash that is needed to pay for housing, employees and suppliers, as stores reopen. This uncertainty is prohibiting the organization from planning the upcoming seasons with confidence.

Now. The unsettling news is that both basic and advanced methods will not perform as expected this 2020 Summer Sales Season.

"The unsettling news is that both last year's basic and advanced markdown methods will not perform as expected, this 2020 Summer Sales Season."

Why last years’ markdown methods won’t work for the 2020 Summer Sales Season

Simple. Both methods especially look at past seasons. Past seasons typically don’t look like this year’s seasons. The 2020 summer season will be a unique season, as this is a unique & unprecedented situation.

The basic methods won't work because the historical rules of thumb have lost much of their validity, so have pre-existing guiding principles. Based on experience, it might still be possible to set reasonably good discount amounts for individual products. Yet, it will require a high multiple of the normal amount of time spent on the task and an exceptional understanding of normal and current market dynamics.

The advanced methods some retailers already embraced won’t work either. The loss of validity is worse for these superior models. These models do not have an ingrained understanding of the dynamics of the market, nor can they translate current events into the most suitable approach. Where these models can crunch a higher volume of numbers; their outcomes will be corrupted in the present-day situation.

And that is why we created a specific tool for the unique 2020 Summer Sales Season

That is right. We listened to the retail teams tasked with setting the right markdowns in this unprecedented situation. We drafted the blueprint for a Summer 2020- specific tool that takes over the heavy lifting.

We created an easy-to-introduce tool that functions in a familiar Microsoft environment. While data & custom algorithms run in the background, the purchasing or category manager has a three specific Power Bi dashboards available to support his or her decision-making.

The aim is twofold:

  • Having direct access to the insights of last weeks’ markdown & sales performance to assess what is or isn’t working and share that info easily with other team members;
  • Having a predictive tool that predicts what the optimal markdown should be, what turnover can be expected or lost if set differently.

The 2020 Summer Sales Season will be different, be sure to make it count.

This tool did not appear out of thin air. These past years we 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, the team is looking at a 50% reduction in time spent

With this tool, we’re convinced that teams can increase the velocity of decision-making in this rapidly changing environment. Swift decision-making, essential to safeguard the organization’s cash position for the months to come.

The early results of retailer's applying the tool project a 2,5% - 5% increase in overall revenue, resulting in up to a 10x return on investment.

If you would like to know more about this, do contact us.

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