![]() To skip a month because you are too busy will cause the system to fail. Perform your monthly duties.Each month, the above duties must be performed without exception, for all categories and vendors. Promote old accessories with “free with purchase of” offer.Ĥ. Include in your monthly e-newsletter to your client base. Put on web page in your clearance section. Here is an example of a markdown strategy that has worked for many furniture retailers: ![]() Be creative in your actions so that you can find what works best in your market. Your actions should get progressively more aggressive, providing more incentive for customers to buy at each level. Define your “Golden Actions”.Now that you have six markdown levels, you need to define what you will do at each level. (This will occur provided you only buy new merchandise when you have a true open to buy).ģ. You will be able to tighten up the levels as you start seeing results and your inventory to sales ratio begins to fall. If this is your case, you should set the periods further out so that no more than 30% of your inventory is marked down at any one time. Many companies however, will be more heavily inventoried due to the absence of a working markdown system. Typically if you are at a good range of inventory to sales (15% - 20%), setting six levels every 60 days is a great place to start. To do this, you need to set inventory aging dates. If your inventory manager/buyer cannot perform in this area, he or she should be replaced.Ģ. This task should be given to a highly responsible person who has proven that he or she can successfully complete tasks. Choose a project lead.This is one of the most important jobs in your company, as it significantly improves merchandise flow. ![]() When you give your customers unexpected discounts (not during a clearance sale) on “dogs”, they tell their friends and show off your products! Their friends will remember and visit you when they are in the market.ġ. Retailers who implement this properly, spend less money on advertising, because they harness the power of “word of mouth”. They will have greater product selection and be able to offer deals to their clients more often.įinally, one of the most overlooked benefits of an efficient markdown system is that it delivers free advertising. Once your salespeople see this system in action, they will love it. Because your dogs will be sold faster, funds will be made available to try new merchandise items that may become best sellers. By doing it this way, you will sell more merchandise at a higher mark. Simply put, the older the merchandise, the bigger the markdown. Merchandise is discounted by a lesser amount in steps according to how old it is. Slow moving merchandise is identified quickly, discounted earlier, and sold faster. Measuring The Value Of An Efficient Markdown SystemĪn efficient markdown system has a considerable impact on profitability and cash flow because it greatly improves GMROI. Clearance sales are OK, but they should be conducted in accordance with an efficient markdown strategy whereby only the very oldest merchandise is sold at the largest discounts. These are time consuming events that are massive margin eaters. Many stores slash prices at semiannual clearance sales. Lastly, dog merchandise is typically marked down too steeply. Proper systems tell the truth because they are unbiased. ![]() Retailers that rely on the feelings and memory of a trusted manager to supply this information, always miss items that should be marked down and may even discount items that should not be marked down. Even if your store is small, you need an automated system to let you know which items are not moving. Secondly, dog merchandise is not properly identified. By waiting this long, valuable floor space becomes stagnant and the opportunity cost of trying a different item in its place is missed. Some retailers only recognize an item if it does not sell in three to six months, for example. However, the process by which most home furnishings retailers execute their markdown strategy is inefficient.įirst, “dog” merchandise is identified too slowly. Most retailers will agree that marking down slow moving, discontinued, or seasonal merchandise will cause customers to eventually purchase slow moving products. Part 3- Five “Golden Steps” to implementingĪ successful and highly profitable markdown system.
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