Sales periods are a delicate time when finding the right markdown rates makes all the difference in achieving goals.
By supporting major retail brands throughout the year on these topics, the Revenue Studio team identified: 4 important optimization pockets that our customers frequently come up with.
1) Explore alternative markdown rates and structures
Since they cannot create contextualized scenarios, teams often apply the rates used during a previous markdown to products by default.
However, this limits the possibility of obtaining better potential results.
For example, we may find that a rate of -40% rather than -50% is sometimes enough to sell the product in an equivalent manner!
THEAcceleration obtained may be the same, but while maintaining a margin and selling as much as at -50%.
The mistake here is to systematically apply the offers of the previous year from the first markdown.
In the same spirit, the question of almost identical reproduction of a substructure Of markdown may also limit the results obtained.
This consists in keeping the same proportion of products at -20%, -30%, etc. as during the last sales.
Overall, we see from customers who join us that previous seasons are often used to frame the current year, which makes it impossible to explore other markdown structures.
Why this observation?
First of all, it's because teams don't have the right tools to quickly simulate different scenarios - it's in fact to overcome this problem that we designed Revenue Studio.
By default, this leads to turning to the consensus of the previous year: the rules are simply adjusted and the number of rate changes between two markdowns varies little.
But we keep it there a real point of optimization.
2) To be able to test and challenge your constraints
The rules for rate changes impact several departments: relabelling, reorganization of racks in stores, etc.
This explains, among other things, that Many retailers choose to limit rate changes between two markdowns, which greatly constrains optimization.
Revenue Studio allows you to test different constraints and challenge yourself by estimating the cost of the rules and the potential results of these changes.
With the tool, for example, it becomes possible toallow hundreds of rate changes between the 1st and 2nd markdown, to generate several scenarios, to play with different rules to visualize the impact of rate changes (merch, logistics, financial return...).
By generating several scenarios to anticipate the impact of each constraint on results, testing different strategies makes it possible to reach the “sweet spot”: For example, we may find that a scenario with 300 rate changes will generate hundreds of thousands of euros more than a scenario based on 60 changes.
It also works the other way around: Revenue Studio will allow you to calculate if fewer changes allow you to achieve the same results...
3) Build a scripted markdown strategy rather than react
Very often, the Framing process focuses on the 1st markdown (usually during the private sales phase that precedes the official sales).
This first markdown is rarely part of an overall strategy, which often means “advising” based on the first few days of sales.
So we are in the reaction, where building an early strategy can make all the difference.
For example, it may be interesting to provide specific rates for certain products for the duration of the OPÉCO.
Sometimes you have to make changes to maximize the objective you have set for yourself
In other cases, it will be more profitable to change the discount by changing, for example, a reference of -20% to -40% at the end.
The optimization comes from the Upstream simulation of ALL rates on each markdown, with all the possible elements to find the optimal train for each product.
This is the main problem to be solved that many cannot address today because they do not have the right tool to do so.
Alphalyr allows a different operation that goes beyond the limits of current systems.
The must?
You can easily simulate what is happening by focusing on margin or flow:
4) Exploring choices that may seem counterintuitive
A case that comes up regularly when we work on optimizing the margins of our retail customers is to assess the interest, on certain references, of Put higher markdown rates on products that are already accelerating strongly.
Why?
Because by simulating their impact with the Revenue Studio platform, we often see that these products will work much stronger than their initial flow and generate a considerable mass margin.
While at first glance it may seem counterintuitive to increase the discount on products that are already selling very well, our analyses show that very often The discount effort impressively increases sales.
Our tool makes it possible to identify this and to refine the strategic mix. It is of course possible to balance these sales objectives with the constraints linked to brand image.
