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  • Writer's pictureCherie Beslich

Top 5 markdown actions to take to dominate at mid season sale

To set you up for success and ensure you dominate the first quarter of retail trade, we give our tips for your markdown strategy what to look for when analyzing sale performance, taking further discounts and adding new lines to sale.

Mid season sale shopping bag

Here we are already half way through the first season of the year and in the midst of Mid Season Sale (MSS) mayhem. Now is the time to check how your markdown performance is tracking against your retail markdown strategy keeping inventory management top of mind, so you have budget to fuel your next season.

Mid Season Sale (MSS) is an opportunity for retailers to clear through any stock that is old, underperforming against expectation or seasonal.

The reason why this analysis is so important, is because as the new season approaches retailers do not want Open To Buy (OTB) funds tied up in last season's slow movers particularly if we are transitioning from summer to winter or vice versa. Basically if we don’t clear through this season's obsolete stock we risk having our replenishment funds frozen in aged inventory that will prevent us from trading when the new season freshness launches!

Open to Buy (OTB) is a retail budget that outlines the money that is available to spend on future orders (replenishment and newness). An OTB takes into consideration the amount of inventory you have on hand and the ideal amount of stock the business is required to purchase to meet budgeted sales and demand of the customer.

So your markdown skus are live, but how are they tracking? Selling like hot cakes or still turning on 20 weeks of cover (eek!). It’s always important to identify the slow movers quickly, even more so during sale periods. I know it can be disappointing when you thought a particular style was going to set your world on fire but the customer didn’t agree… devastating.

We’ve all been there, the first round markdown goes live and the styles still aren’t moving, what! But never fear, now is the opportunity to review performance, and make some tweaks to kiss the slow movers goodbye. How you ask? By adding a further discount of course! This is just one markdown strategy that can be implemented to cement MMS success.

Review Performance

I know, I know more retail data analysis really? Yes, to succeed we must dominate with data and understand what is going on inside our retail business. Have a fear of analysis paralysis? Don't worry I have you covered, and will outline the key areas to look at while completing your MSS reporting below.

I like to think of retail analysis as a better way to understand your customer. Sale analysis will provide you with insights regarding your pricing architecture and what products resonate with your customer. Maybe you selected a great product but it was priced too high, you will see this in the data when it flies off the shelf with a light discount. Something to keep in mind for your next round of assortment planning. Below are a couple of points to review, to ascertain what action to take.

Full price vs markdown mix

So first things first, review performance of current markdown clearance stock - what is driving your overall business sales since the sale period began? During sale periods, we expect to see a shift in the percentage of sales that are coming from markdown, after all the aim of the game is to clear underperforming stock. However, if your data is telling you otherwise it may indicate underperformance.

Markdown cover

Consider how quickly your sale stock is turning. You want to ensure you have enough stock to continue strong sales for the remainder of the sale period. On the flip side, if you have too much cover you risk being overstocked. It’s all about balance and the actions you take to restore that balance.

Sell through rate of markdown stock

Sell through rate will tell you what percentage of markdown stock you have sold through. This varies from brand to brand, ideally you would have an ideal ST% by week/month set at the beginning of the season to measure against.

Hang on, wait a minute, which styles did I markdown again and how will I know which sales came from markdown? We’ve all been there, hunting down the right version of the markdown file we’d saved those precious sale SKUs in. (Was it version 6.0, or SALE_FINAL.xls?!)

Thankfully, Style Arcade’s Rollups makes it easy to view the above mentioned metrics and have your sale SKUs saved in the one place (for the whole team to access), so you understand what's driving your business and then decide the appropriate actions to take.

Style Arcade Rollups tab
View all your live data straight from your system (rather than 5 old data downloads!)

Pairing the above metrics together will identify the levers to pull to drive certain outcomes.

For example, if you have a sku with high weeks of cover and low ST% the levers to pull would be applying a further discounted paired with marketing support.

Take Action

Now you have an understanding of what’s happening, it's time to implement actions and pull identified levers to impact your business results.

1. Apply a deeper discount

When taking a further discount, usual business practice aims to protect profit and margin and ensure you never offer discounts deeper than the cost of the price of the stock you paid. Ideally, the aim is always to break even so keep this in mind when deciding how much deeper to discount on those slow skus.

Next decide how you will execute the further offer you have decided to apply. Will you offer an additional discount on top of the original markdown using a discount code? Example, Use code XZY at check out for an additional 10% off sale skus.

Or will you adjust the red pen to display to reflect the new reduced amount?

Consider consumer pricing psychology, will you round your discounts to the nearest dollar or .99 cents?