Are You Prepared for Winter Markdown?

When markdowns are managed successfully they are a highly effective way for retailers to clear through inventory whilst continuing to drive cash margin. Winter Markdown is arguably the most important to get right, due to the concentration of market activity around the holidays, and the reduced window of opportunity to sell through seasonal product. Too often, retailers fail to properly consider their markdown strategy ahead of sale which can result in disappointing sales and heavy terminal stocks. In order to successfully prepare, there are 4 key questions that should be considered when planning for Winter Markdown:

What are your targets for and measures of success?

The first step in creating an effective markdown strategy is to clearly outline the goals for the event and how success is to be measured. The targets should be defined and agreed upon prior to the markdown period and should be quantifiable to ensure that the success of the strategy can be easily determined. These goals will be key in defining the structure of the markdown strategy.

A good approach to measuring success is with a set of sell-through targets and margin goals. Retailers can often find it challenging to achieve both simultaneously using a traditional approach to markdown planning but both can be realised when using a data science-led markdown solution.

How will you phase your markdown?

It is critical to create a phasing strategy for the markdown period by setting out a plan for the number of new lines into markdown each week. Whilst plans can change, defining a strategy from the start encourages retailers to think critically about how best to leverage their markdown inventory.

Further, it is crucial to have a plan for any changes to the headline markdown message and how it will be communicated to the customer. Significant discounting above a headline message can damage margin without driving sales - if an offer is not clearly conveyed, it is possible for it to be missed by the customer or even look like a mistake.

When will each group of lines launch?

Timing is key when it comes to markdown, where the phasing of lines can mean the difference between a successful launch and trying to claw back demand later in the sale.

Determining a launch strategy for each group of lines allows a considered allocation plan. It ensures that product gets to the right place at the right time, so sales can be maximised. This also supports in the development of a robust social and marketing strategy, helping to ensure the most engaging message is conveyed to the customer at all times throughout the event.

How will gifting and winter product be managed?

Gifting items, such as small accessories, seasonally-themed knitwear, and heavier winter product have a smaller window of opportunity to sell through than more transitional product. It is therefore important to have a good understanding of each product’s propensity to sell by week, to allow for better decision-making around timing into sale and pricing, ensuring that discounts are not given away unnecessarily.

A considered strategy is the first step in ensuring the success of Winter Markdown. Complementing this with a data science-led markdown solution or service and the resulting optimised prices puts retailers in the best position to drive sales and cash margin whilst minimising the amount of time spent planning and reacting to markdown during the event.

At TPC, our Markdown Optimisation approach has a success rate of 100% and our clients have seen impressive results following the implementation of our MDi service and tools. If you wish to get in touch to find out more, please contact us through our website or on LinkedIn.