markdown strategy: improving margin by establishing · pdf filereg/promo life 95% 90% 80%...
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The Parker Avery Group is a boutique strategy and management consulting firm that is a trusted advisor to leading retail companies. We specialize in solving merchandising, supply chain, store operations and multi-channel commerce challenges. We combine deep experience and thought leadership with proven consulting methodology to deliver world-class results for our clients.
A B C
Basic Fashion Basic Fashion
Reg+Promo Life 52 weeks 14-39 weeks 9-13 weeks
Total Sell-Thru % Tgt Feb BOP 80% 80%
Life Sell-Thru % NA 100% 100%
Fill/ Service Level thru Reg/Promo Life
95% 90% 80%
Chase Strategy Chase Chase No
# of Markdowns NA 3 3
Cadence b/w markdowns NA 4 4
Suggested MD % off NA 25 – 30% 30 – 40%
35 – 50% 40 – 60%
50 – 75% 60 – 75%
Sell-Thru % Experience NA 1st = 55% 1st = 55%
2nd = 35% 2nd = 35%
Final = 10% Final = 10%
Max # of weeks @ Markdown
NA ~10wks ~10wks
client A $15B+ specialty retailer of hardlines and softlines with multiple channels, store formats and brands. Focus was on the softlines business (~$500M).
Improving margin by establishing better markdown management through rule-based framework, training and reporting.
challenge
The retailer was transforming its softlines business, and a large component of the expected business benefit would come from shifting clearance margin to regular/promo and increasing the clearance margin rate through better markdown management. Challenges in the current markdown process included:
• No seasonality visibility • Limited markdown rules in
place • Markdowns taken at
national level • No integration to
merchandising or marketing calendars
• No visibility or control at item level after first markdown
• No “what if” capability
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Markdown Strategy:
parker avery solution
The Parker Avery Group helped the client address the challenges identified in the current state by recommending six initiatives:
1) Establish a markdown rules framework by product type
2) Add markdown rules to the assortment planning process
3) Improve reporting to provide visibility to markdown performance
4) Implement rule-based, localized markdown capabilities
5) Establish a markdown training program for merchants and planners
6) Implement markdown optimization
results
As a result of the project, the client expects to achieve the following benefits:
• +3% shift from clearance to regular/promo margin
• +1.3% clearance selling margin rate
• Maximized sales • Improved sell-thru
Seasonal Pricing Parameters