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With a new web-based pricing optimization system, Casual Male fashions a pricing strategy that maximizes both profit margins and sell-throughs, in part by pinpointing markdown dates.
With thousands of SKUs to constantly review, apparel retailer Casual Male Retail Group Inc. had found it difficult to figure which products to mark down in order move inventory whenever sales slowed. But with a new web-based pricing optimization system, it`s been able to fashion a pricing strategy that maximizes both profit margins and sell-throughs, Steve Schwartz, senior vice president of planning and allocation, tells Internet Retailer.
"By nature, retailers are a pretty optimistic group and tend to mark down too late," he says. "In the past, we would mark down products really late in the selling season, or after the season when customer traffic is less, and take a deeper hit with margins. Now we take a far smaller hit."
Last June, Casual Male began using a hosted web-based pricing optimization application from ProfitLogic. The system, which was up and running within two months, will pay for itself within the first year of operation, Schwartz says. Using historical data on Casual Male`s sales and inventory levels for each SKU as well as parameters set by the retailer on how fast it wants to move merchandise, the system provides recommendations on when to markdown products at what discount.
Schwartz notes that it is virtually impossible for his merchandising staff to set markdown prices on all SKUs without the help of the pricing optimization software because there are simply too many products and related information, such as how fast particular products sold in the past at certain prices, to consider. He adds that the system also makes it possible to set different markdown prices for different parts of the country. "Prior to this system, we took markdowns across our whole chain," he says. "For example, on July 4, we mark down swimwear across the whole country. Now we can do it by groups of stores. We may mark down swimwear on July 4 in the northern part of the country, but in the central areas not until Aug. 1 and in the south not until after Labor Day."