How Goody’s Family Clothing plans to boost gross margins by $17 million
With a new web-enabled price optimization system, Goody’s Family Clothing Inc. is planning a $17 million improvement in annual gross profit margins throughout its chain of more than 383 stores, CEO Isaac Dabah says.
“Our focus on gross margin return on investment enabled us to build on Goody’s strong foundation and perform according to our financial plans in 2006,” says Dabah, who also is CEO of GMM Capital, which teamed with Prentice Capital Management last year to buy out Goody’s and take it private. “We anticipate even better results this year.”
Indeed, if Goody’s continues along the process it began this spring, $17 million will only be the starting point in improving gross margins, adds Dave Smith, vice president of store systems. “We think $17 million is a conservative estimate,” he says.
It’s conservative, he adds, because the retailer’s new Oracle Retail Price Optimization system, which Goody’s is making accessible through web browsers to a team of 30 merchandise buyers, can recommend price points that will move the most merchandise at the highest margin and within planned selling periods.
Before deploying the price optimization system, which Oracle Corp. hosts via the web, Goody’s realized it had been leaving too many products unsold at the end of a selling season or promotional period, Smith says. In some cases, it sold out of some items too quickly after marking down prices too soon, he adds.
In the past, individual merchants did their own calculations for price markdowns and other pricing plans based on their own belief on how well products were selling, but were limited in the number of products and categories they could manage with effective pricing strategies. “It comes down to how much data a person can look at and analyze,” Smith says. “When you have 150,000 products, it makes it impossible for merchants to manage those products at super-detailed levels.”
Goody’s started working with Oracle two months ago to deploy the price optimization system and spent about four weeks to feed the system with three years of Goody’s sales and inventory data, Smith says.
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