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Case Study

Automated markdowns across all channels and countries

NKD store

About NKD

NKD is a leading apparel retailer in the discount sector and provides its customers with a wide product range of seasonal fashion for the whole family, as well as home textiles and home accessories. With around 8,000 employees, NKD is one of the leading clothing retailers in Central Europe. Its target group is aged between 30 and 60.

NKD operates approximately 1,850 stores in Central Europe (Germany, Austria, Italy, Slovenia, Czech Republic and Croatia), of which around 1,300 are located in Germany. Since 2007, NKD also operates its own online shop in Germany and Austria, which delivers mainly via Click&Collect.

NKD achieved € 698 million in revenues in 2018 and an average sales growth of 4.7% p.a. from 2014 to 2018, meaning it grew faster than the market.

The Challenge

NKD was faced with the challenge of optimizing markdowns across multiple sales channels and countries – for thousands of SKUs. As the markdown process typically requires a high level of manual effort and involves a plethora of data, NKD recognized the need for an automated solution based on accurate demand forecasts. However, NKD’s existing pricing solution was a black box and was therefore not accepted by the users. In addition, the price calculations were not satisfactory and NKD’s specific business rules were not taken into account.

Thus, NKD needed a new pricing tool that would be fully customizable and entirely agile for the individual business demand.  Specifically, the new solution needed to fulfill the following requirements:

  • Integration with NKD’s existing ERP system
  • Minimum use of IT resources / up-and-running in short time
  • User-friendly interface
  • Transparency

NKD’s objective was to maximize revenues, profits, and the sell-through rate and ensure that consumers always receive the optimal price.

NKD & aifora

In order to calculate the economic potential of aifora’s markdown optimization tool, a value validation was conducted in which NKD’s historical transaction data was analyzed. This retrospective analysis also enabled the identification of the relevant influencing factors and channel-specific properties for NKD. On this basis, a pricing model was developed that was geared exactly to NKD’s needs and that respects NKD’s business demand (e.g. individual prices for each business unit).

"We were particularly impressed by the fact that aifora makes a transparent recommendation depending on the selected pricing strategy."
Abraham Tadesse, NKD
Abraham Tadesse
Director Merchandise Planning & Controlling at NKD

Following the value validation, a Proof of Concept was conducted, in which the markdown optimization tool was implemented for select product groups. During this phase the users became familiar with the use of the tool, internal processes were adapted, and the solution was further optimized based on the users’ feedback. After just 3 months the solution was implemented for all product groups and business units and all users were successfully onboarded.

The Solution

  • Demand forecasting based on internal and external data
  • Calculation of markdowns per article per country
  • Consideration of NKD’s specific business rules, workflows and strategies
  • Automation of markdown process
  • Transparent display of results in web interface

Impact

The implementation of aifora’s intelligent pricing solution has created a significant financial impact in terms of profits, revenues and sales. Furthermore, by automating the pricing process, aifora enables the merchandising team at NKD to save time. Thus, prices can now be set individually for each business unit and each country in the same time that it previously took to set standardized prices.

Increase in revenues

Increase in gross profit

Increase in sell-through-rate

Compared to the pricing tool that NKD was previously using, user acceptance for aifora’s solution is considerably higher, due to the high level of transparency. Users have thus gained trust in the AI-powered tool and gradually increased the level of automation.

NKD in the News

stores+shops | NKD: Intelligent price optimization in real time

The textile retail chain NKD is breaking new ground in pricing. By evaluating large amounts of data and using self-learning algorithms, the company intends to further optimize its pricing and become more competitive. Read more (in German).

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