Retail and CPG companies struggle to balance investments that remediate short-term pains and improve long-term resiliency. Disillusionment over prior investment payoffs, plus being in constant crisis mode, has supply chain executives focusing on fundamentalssuch as efficiency improvements and cost containment.
When retailers come to us to look at our AI-driven lifecycle pricing solutions, the first people we talk with—the “point persons” responsible for overseeing pricing decisions—are usually quick to grasp the real benefits. They’re eternally striving for that ideal markdown “sweet spot” for every SKU—accelerating sell-through while preserving—if not squandering—margin. But without a unified, data-driven markdown strategy, they’re often the first to concede their haphazard, decentralized markdowns are “a mess”.
Anyone who’s purchased anything over the past 8-12 months—from a can of tuna to a new SUV—has shared a universal lament—almost everything seems to be getting more expensive. As of this past March, the Consumer Price Index (CPI), the government’s yardstick for tracking inflation, reported an April figure of 8.3%—a nominal .3 drop from the previous month’s 40-year high.
During the last 12 months, fashion retailers heavily invested in tightening assortments and improving their inventory efficiency. While these investments are needed, all the benefits come undone if a customer cannot find their size. Worse, tightening assortments exacerbates the size stock-out problem, damages customer satisfaction, and creates significant financial pain unless size allocation is accurate. A 20% size misallocation drops margin dollars by 50% if markdown pricing is uniform across all sizes.
Not an Ideal Predicament
Depleted revenue, compressed margins, a shortage of labor, plus an infrastructure not designed for an online volume consisting of 40-60% of total sales. Not ideal for fashion retailers. And beyond that, retailers experience up to 8 percentage points of margin loss on a digital order.1
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