The statutory regulations on which end-of-season sales used to be based have long been abolished. Nowadays, retailers permanently reduce prices and luminous red sale signs are visible almost year-round in the shop windows of fashion houses. Many retailers advertise reductions on a wide variety of occasions and thus take part in the ongoing price war. Today’s price transparency turns customers into bargain hunters, who easily compare prices online and afterwards buy products at the cheapest shop.
Retailers feel forced to take part in the non-stop pricing battles and present customers favorable offers and discounts. However, which articles are deliberately reduced and how high – or how low – the red-prices are, is often determined only based on the current stock and an “experience-based gut feeling”. This process as a basis for decision-making usually results in lost profits and margin losses and additionally can have a negative impact on the customer’s shopping experience. New, innovative concepts for pricing must be considered, which imply a wide variety of decision factors, analyze large amounts of data and thus define an optimal sales assortment.
One possible instrument is an automated markdown tool based on intelligent algorithms, such as aifora’s Markdown Optimization Tool. This is one of the four modules of the comprehensive pricing suite IPA (Intelligent Price Automation), which supports retailers throughout the whole pricing process of the entire product lifecycle. The Markdown Optimization module calculates price elasticities, considering demand forecasts as well as current sales and inventory developments. In addition, relevant price influencing factors are identified and weighted into the calculation so that the ideal markdown level is determined at the end. Large amounts of data from internal and external sources can be processed in this machine learning solution and, thanks to an integrated crawler technology that currently provides insights on 55 brands, retailers can respond to market prices as quickly as possible.
Pricing is becoming a key retail tool that not only impacts profitability, but also influences brand image and customer experience. In today’s world, increased price transparency and increasing amounts of data make it almost impossible to determine optimal prices using traditional methods, so that automated markdown tools must be used to always offer customers the right price at the right time.
It is not enough to listen to your gut feeling when defining prices – increase your margin with pinpoint prices!