Due to both evolving purchasing patterns and competitive landscape, retailers face increasing challenge to meet their financial forecasts in terms of revenue and inventory.
Being able to propose the right offer at the right time becomes key, and can be successfully supported by a markdown management process based on constant measures, analyzes and adaptations to the environment.
EBC Business Consulting - Price management for non food retailers
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2. Mail: Ariel.Aubry@edifixio.comSeptember 2011 To Download this presentation, please visit our web site EBC Business Consulting : - Blog – Here (Visit our blog) - Publication – Here (downlaod presentation)
3. September 2011 EBC Business Consulting : Price management for Non Food Retailers Non Food Retailing is undergoing profound changes … which calls for more reactivity in Planning and In season Management Price Management becomes one of the key challenges … … in a difficult context Markdown Management is one of the key In Season Activities Markdown Optimization Demand Forecasting at the POS level Performance Analysis Scenario Analysis Optimal scenario Selection This approach requires strong analysis and simulation capacities Standard Operating Procedures Benefits of an approach with a Markdown Management Solution
8. Only 25% of all goods are sold at their introductory price, during their 1st month on the market
9. Most goods are sold at a discount price during sales, and 20% end up in unsold goods
10. In the Electronic goods market, the growth of ecommerce and shopbots on the Internet triggered a price war on many categories
11. Consumers are becoming professional purchasers, hunting more for bargains than for the required product, the best quality, the right Brand, or the proximity
12. In some Market, like Apparel for instance, the competitive landscape has changed durably with the success of International Chains (such as H&M, )
14. With their low cost positioning, triggering impulsive purchases, and their highly efficient marketing campaign with VIP and famous designers
15. With their large number in season collections, enabling to renew constantly their assortment and to acquire more customers EBC Business Consulting : Price management for Non Food Retailers 3 Non Food Retailing is undergoing profound changes September 2011
16. EBC Business Consulting : Price management for Non Food Retailers 4 Measure Analyze Drive 14 BEST inventory OUT 12 BEST 10 SLOW 8 6 4 Simulate / Decide 2 0 1 2 3 4 5 6 7 8 9 10 … which calls for more reactivity in Planning and In season Management Top seller / worst seller POS performance Benchmarks Promotions Inventory Engagements Sales YTD /Target Replenishment Updates Engagements Assortment Strategy POS Engagement Prices and markdowns Sales Forecast OTB reassignment Reconciliation with the financial planning September 2011
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18. To achieve this, retailers require excellent execution in Product Lifecycle Management, and therefore in Price Lifecycle Management and markdowns. The key becomes being able :
24. To optimize the performances of all markdowns, following costs, ROI, Price image, loyalty. EBC Business Consulting : Price management for Non Food Retailers 5 September 2011
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26. Volumes are extremely large, in particular in the Apparel Industry which has to deal with size and color variants per POS
27. Cycle times are getting shorter and shorter requiring extreme reactivity
29. Analyzing multiple markdown scenarios (product, POS, time) is exponentially complex, making manual computation impossible
30. Must have data are often distributed in multiple heterogeneous systems
31. Data analysis is complex and filtering out the impact of seasonality, local competition, weather, local promotions, etc. is difficult
32. Organizations rarely have the capacity to enforce strict pricing processes, among a large number of actors (central, local) with the right skills and data.
34. The scorecard of each scenario highly depends on the capacity to analyze and act at the finest level of detail (item/POS)EBC Business Consulting : Price management for Non Food Retailers 6 September 2011
57. Under performing items detectionRe calculation of the Demand Curve Natural Demand – Initial estimate Actual sales Natural Demand – Reviewed Permanent update of the Demand forecast to detect under performing items September 2011
61. … TriggeredUpdated Demand 1 – Automatic recommendation of the markdown for the under performing items 2 - Creation of optimizationscenarios 3 - Analysis of the estimated performances for each scenario 4 – Optimization within the available markdown Budgets September 2011
62. Markdown Optimization 4 – Optimal scenario Selection EBC Business Consulting : Price management for Non Food Retailers 11 Actual sales / Forecasted sales Sales optimized with the markdown Target sales Inventory Initial inventory Forecasted margin 25% Optimized margin 35% Excess inventory Target margin 40% Final inventory Time Selection of the scenario optimizing the performances of the revenue, the margin, the inventory, within the markdown budgets September 2011
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64. Make an estimate as reliable as possible of the future performances according to the past performances
73. Benefits of an approach with a Markdown Management Solution Improvement of the Profitability with margin increase, inventory decrease (gross margin improved by 5 to 15%) Improvement of revenue and margin forecasts with detailed demand modeling and follow-up Improvement assortment rotation, with a better inventory flow (improved by 5 to 20%) and an optimized management of the end of life items Improvement of operational efficiency by an optimization of the number of price changes and an overall consistency Return on investment is less than 6 months EBC Business Consulting : Price management for Non Food Retailers 14 September 2011
74. September 2011 EBC Business Consulting : Price management for Non Food Retailers