5 Ways That Optimization Software Helps Retailers in Taking Markdowns

2019-01-23T17:52:56+00:00February 20th, 2019|Best Practices|

Managing inventories to move product in ways that will optimize efficiency and profit always involves an element of the unknown.

When you order product months in advance to prepare for seasonal demand, for instance, you naturally expose your business to potential losses or inefficiencies should the market not align with your planning.

In short..

What do you do with all that extra stuff you ordered last year for sale in the summer when it is still sitting on your shelves with fall just around the corner?

The fitting response is to discount the excess product. Markdowns are a part of the retail business. You have to clear unsold inventory to make room for incoming product.

The key, though, is to minimize the amount of product you have to mark down and the rate at which you have to discount it to move it out. One way to do this is to use optimization software that will help guide your decision making throughout the process, from ordering to moving product to marking it down near the end of its cycle.

Localized Product Distribution

All aspects of your operations need to be linked. This can allow you to plan according to the smallest detail and have your decision making both informed by the entire system and impacting the entire system.

By having an optimization software platform that allows you to plan your inventory acquisition, sales tracking, and discounting, you can better align your inventory with your sales and local demand for your products.

Optimization software can help you get more local when planning sales for different locations while staying responsive to what and how much customers buy as the season progresses.

Data-Driven Promotional Planning

Knowing exactly when product tends to be bought helps you plan promotions. Inviting business at the beginning of a given season with a sale is a common and great promotional concept.

Knowing exactly how much to discount the product can help you get people in the doors without giving away too much. Data on customer demand and price point thresholds can help you plan your promotions accordingly.

Smart planning using data from your optimization software can take the guesswork out of promotional planning.

Understand Demand Cycles for Efficient Markdowns

In addition to sales to bring people in the doors, you want to understand more about when a product is in demand throughout the time you have it.

This will help you plan for natural fluctuations in demand so you can plan promotions accordingly. Some seasonal products may involve demand that has ebbs and flows that are more subtle than others.

High demand at the beginning of the season can be followed by bumps in sales that you can plan for with your optimization software.

Inventory and Space Relationships

Optimization software is key for staying smart with your inventory.

By having a system that communicates with your inventory control and financial software platforms, you can better manage your space to be sure that there is always room for incoming and in-demand product. 

Using space relationships through optimization software in addition to sales can help you better manage your inventory.

Flexible Promotions that Adapt to Your Reality

Even with the best planning, unexpected fluctuations in demand will occur. Being responsive to these fluctuations can save your business a lot of money.

If demand dips during the season..

Your system can alert you to lagging product movement and provide information on the levels of markdowns that will get the product moving again.

By adding a 30 percent discount midway through the season to get more product moved, you can avoid marking it down 70 percent at the end of the season to get it off of your shelves.

Efficient operations can make a huge difference to your bottom line. Optimization software keeps your system running more efficiently. It helps keep all aspects of your operations linked so you can adapt to changing realities and increase profitability.