Target looks for better margins with rollout of web-based pricing software

After improving gross margins in its Marshall Field’s division with a web-based merchandise price optimization system, Target Corp. is rolling out the ProfitLogic Price system to all of its more than 1,100 Target stores, ProfitLogic reported today.

Target has operated the ProfitLogic Price optimization system for about nine months to manage promotional and markdown pricing in its Marshall Field’s department stores. The system relies on historical sales data and mathematical algorithms that recommend when to lower prices and by how much in order to meet sales goals with maximum margins. Merchandise managers view recommendations on a web page, then decide to accept, modify or reject them. “This has increased gross margin dollars in Marshall Field’s,” a ProfitLogic spokeswoman says.

Target and ProfitLogic will take about 20 weeks to deploy the merchandise optimization system throughout the chain of Target stores, which like Marshall Field’s stores will use an application hosted by ProfitLogic, the spokeswoman says. The system is designed to recommend promotional and markdown pricing schedules on fashion and seasonal products, including apparel and items like patio furniture, for which initial prices are set by suppliers.

Most retailers that use ProfitLogic’s merchandise optimization system initially deploy it as a hosted application to expedite its benefit and free up their internal IT staffs, though some will eventually move to running the application on their own web servers, the spokeswoman says. She adds that retailers can expect to see a return on investment within a year.

Target currently operates more than 60 stores in its Marshall Field’s division, but has not yet decided whether it will also roll out the ProfitLogic system in its Mervyn’s division. Target is considering the possible sale of those divisions.

ProfitLogic’s full merchandise optimization suite, which is being used by J.C. Penney Co. Inc., also includes modules for forecasting how much to order from suppliers and for deciding how to allocate incoming goods to individual stores and distribution centers.