JDA Software Offers Price Optimization Strategies to Help Retailers Better Understand How & When to Mark Down a Product & Inc...
August 25 2010 - 8:00AM
Business Wire
The retail landscape has changed dramatically. Multiple selling
channels, constrained consumer spending, abbreviated product
lifecycles and offshore sourcing all contribute to an increasingly
more challenging retail environment. Retailers must tie their
pricing strategies all the way back into demand plans to ensure
that inventory is readily available at the desired location and
price point. While retailers discount slow-turning products to
allow for sales of high-margin items as a way to improve margin
performance, many companies still struggle with how and when to
mark down a product.
"Retail is becoming much more competitive today, as price
sensitivity continues to erode consumer loyalty," said Jane
Fazzalari, vice president, retail industry strategy, JDA
Software Group, Inc. “The challenge of meeting margin goals
while offering prices appealing to consumers has made time-phased
markdown decisions a critical component of the product lifecycle
strategy. It can cost a company dearly if done incorrectly.
Therefore, more than ever, retailers need an optimal pricing
strategy to achieve their business objectives.”
JDA Software Group, Inc. (NASDAQ: JDAS), The Supply Chain
Company®, offers the following effective merchandising and pricing
recommendations to help retailers maximize sales:
- Deliver localized
assortments. In an ideal world, retailers score big sales by
selling products at full price and avoiding hefty markdowns. In
reality, seasonality, uneven selling cycles and fluctuations in
consumer demand can all have a negative impact on sales, causing
inventory stagnation or missed revenue. Markdowns are therefore
inevitable. However, a truly consumer-driven retail business can
minimize markdowns by recognizing its products’ attributes and the
shopping habits of its customers – demographics, geographical
conditions, calendar holidays, etc. – so that the right product is
delivered to the right store and sold at the right price. A
localized assortment strategy that is tied to a retailer’s demand
plans is one of the most effective ways to improve profit margins
without slashing prices. It requires that retailers understand
transaction-level data and make accurate forecasting and
merchandising decisions that match specific consumer demand. When
possible, retailers that implement a localized assortment strategy
should also match their pricing and promotions to assortment lists
at the store or store-group level.
- Have a comprehensive view of
demand. When assortments and product promotions fail to move
inventory, markdown clearance becomes the last resort. Aged
inventory in the store must be liquidated to make room for new
inventory. In addition, today’s economic uncertainty has turned
many consumers into discount shoppers. Therefore, markdowns can
drive traffic into the store and ultimately help products sell
faster. But how do retailers determine the optimal markdown price
and still manage to meet margin goals? They must assess the true
margin impact of each product, tailor markdown plans by
store/location, factor in the price sensitivity of their customer
base and understand the opportunity costs. For example, a 40
percent markdown on new summer apparel at mid-season might increase
sales and prevent the potential losses, as compared to offering a
70 percent markdown on summer apparel at the end of the season when
shoppers have already set their sights on fall collections.
Advanced technology that enables retailers to use a set of business
rules that control minimum/maximum price reductions, the number of
reductions and the price formats for each product will help close
the gap on lost sales.
- Link pricing strategies to
space and labor management. Typically, the three greatest
expenses for retailers are inventory, labor and real estate. Even
if localized assortments and optimized pricing help move inventory,
mismanagement of the store space and labor can still hurt net
profitability. This has led some retailers to shift to smaller
stores, leaner assortments and faster logistics. Hence, product
replenishment has moved from two to three times a week to enhance
shelf productivity. Additionally, markdowns and product promotions
may create extra activity in the store. A store staffed with the
right number of associates to meet store-specific traffic demands
can help retailers save on labor costs and capture revenue
opportunities.
To learn more about how JDA Software helps its retail customers
implement effective markdown strategies, view the Effective
Markdown Strategies video or visit www.jda.com.
About JDA Software Group, Inc.
JDA® Software Group, Inc. (NASDAQ:
JDAS), The Supply Chain Company®, is a leading provider of
innovative supply chain management, merchandising and pricing
excellence solutions. JDA empowers more than 6,000 companies of all
sizes to make optimal decisions that improve profitability and
achieve real results in the discrete and process manufacturing,
wholesale distribution, transportation, retail and services
industries. With an integrated solutions offering that spans the
entire supply chain from materials to the consumer, JDA leverages
the powerful heritage and knowledge capital of acquired market
leaders including i2 Technologies®, Manugistics®, E3®, Intactix®
and Arthur®. JDA’s multiple service options provide customers with
flexible configurations, rapid time-to-value, lower total cost of
ownership and 24/7 functional and technical support and expertise.
To learn more about JDA Software, please visit www.jda.com, e-mail
info@jda.com or follow JDASoftware on Twitter.
This press release contains forward-looking statements that are
made in reliance upon the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are generally accompanied by words such as “can,”
“will,” “ensure,” “help,” “enable” and “expect” and other words
with forward-looking connotations. In this press release, such
forward-looking statements include, without limitation, remarks
that certain merchandising and pricing strategies can lead to
certain benefits for retailers. The occurrence of future events may
involve a number of risks and uncertainties, including, but not
limited to: (a) the strategies may not lead to the anticipated
benefits; (b) there may be implementation and integration problems
associated with the strategies; and (c) other risks detailed from
time to time in the “Risk Factors” section of our filings with the
Securities and Exchange Commission. Additional information relating
to the uncertainty affecting our business is contained in our
filings with the SEC. As a result of these and other risks, actual
results may differ materially from those predicted. JDA is not
under any obligation to (and expressly disclaims any such
obligation to) update or alter its forward-looking statements,
whether as a result of new information, future events or
otherwise.
“JDA” is a trademark or registered trademark of JDA Software
Group, Inc. Any trade, product or service name referenced in this
document using the name “JDA” is a trademark and/or property of JDA
Software Group, Inc.
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