Strategic Pricing for Fashion Retailers in Times of Uncertainty
As fashion retailers are reopening around the globe and getting back to business, the need for more strategic pricing capabilities to improve the bottom line is becoming a clear need versus a want. After dealing with several months of uncertainty, the importance of technology to alleviate the disruptive effects on the supply chain and adapt to changing customer buying patterns has never been clearer. Machine learning and automation can quickly react to new behavior and adapt to rapidly changing situations faster than manual efforts due to the enormous amount of data involved and external factors that are affecting demand.
Traditionally in the fashion industry, markdowns have been planned long before the first item hits the rack. Preemptive pre-season markdown planning made it easier to standardize the markdown process, but it sacrificed margin and revenue when markdowns were made too soon or too deep. The next evolution involved a sell-through rule-based approach determined on a given number of weeks the item was on the shelves. The rules-based approach is an improvement to pre-season set markdowns because it can go down to the assortment or category level, but it still requires a large amount of manual intervention by planners which can be overwhelming when they must manage multiple categories.
Fast forward to today, modern retailers can now totally rethink how they do markdowns thanks to artificial intelligence (AI) and machine learning (ML) based price optimization. By incorporating data science into markdowns, internal and external demand signals are considered when calculating price recommendations. Leveraging these insights and signals along with the strategic goals of the organization, localized price recommendations are optimized down to the item/store level preserving margin and revenue. In times of uncertainty and rapidly changing demand, technology can deliver accurate and granular decisions swiftly without the typical time-consuming manual effort that some retailers use today. When you must respond in the now, timing is everything and can make the difference between who survives and who doesn’t in this competitive landscape. To learn more about how price optimization can support fashion retailers and improve the bottom line, read our latest white paper, Strategic Pricing for Fashion Retail to Navigate the COVID-19 Pandemic.