April 4, 2003, 12:00 AM

Web-based pricing tool saves Northern Group from taking costly markdown

After its web-based price optimization system recommended holding the price steady on slow-moving winter jackets, Northern Group sold them out at full price.

Even in Canada winter jackets don`t always sell as well as merchandisers expect. But when Northern Group Retail Ltd. planned to mark down a batch of them by 30% last winter, it changed course after its web-based price optimization system recommended holding the price steady. “We took the recommendation and the sold the balance of the jackets at full price,” CFO Michael Stanek tells Internet Retailer.

The success in holding onto the full price was especially helpful because of a directive from Stanek to boost margins. "We`ve targeted to improve our gross margins by 2% a year over three years," he says. He adds that he expects the web-based ProfitLogic price optimization system--which sits on a web server on the corporate intranet--will account for half of that margin improvement.

Northern Group, which operates 280 apparel stores across Canada as well as a retail e-commerce site for the U.S. market, began deploying the ProfitLogic system last fall and had it operating in time for the holiday shopping season.

In addition to the software, which costs about $1 million to implement, Northern Group also invested in its own web server and dedicated two employees as pricing analysts to work directly with the ProfitLogic system. The employee training, which takes about two days, is included in the cost of the implementation.

Although Stanek declines to give the cost of the web server, he admits it’s a big expense. Nonetheless, he sees a quick ROI from the price optimization system. “It had a pretty big impact on the gross margin dollars we generated for the holiday season,” Stanek says. "We think we`re headed for an ROI within a year."

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