A global footwear and sports apparel retailer used historical sales data and merchant intuition to drive its pricing strategy and markdown decisions. Prices were not localized or adapted to market conditions, creating excessively aged inventory. The company’s leadership team searched for a data-driven solution to optimize their markdown strategy. Specific requirements included the ability to:
"Last year, we only had two price reductions and there was no discernible difference in sell-through between the two. This year we have four main buckets, and have found that the two discount levels that drive the best sell-through are 20% and 40% …it could mean that potentially we do not need to markdown at 50% at all."
Markdown pricing has traditionally been viewed as a way to minimize losses from slow-moving goods and high inventory carrying costs. Yet markdowns remain an integral part of the pricing life cycle. The retailer needed to improve sell-through to reduce aging inventory and recapture lost margins.
Antuit implemented a solution featuring integrated forecasting and elasticity models that optimized markdown pricing by trends, seasonality, life cycle, price, promotions, sell-through, inventory position and other variables.
In the first year of execution, the retailer increased sell-through of its clearance merchandise by more than 10% and expanded the number of markdown levels from two (30% and 50%), to four (20%, 30%, 40% and 50%). This enabled the client to reduce its tendency to prematurely offer the steepest markdowns, and capture lost margin while increasing the average unit retail by 2-3%.
In addition to increasing margin and sales velocity, the retailer significantly reduced the time, effort and workload required to effectively manage markdown pricing.