As a consumer, the percent off you see on a price tag is actually a steeper decrease in gross profit for the retailer, meaning they take a bigger hit on discounts than you may realize.
However, markdowns are crucial to moving excess inventory to increase cash flow and make a profit.
Excess inventory ties up cash. A company acquires inventory for the purpose of reselling the merchandise at a profit. Turning that inventory into cash can then be re-invested in new inventory and pay for the day-to-day expenses of the company. Excess inventory, as it represents a loss in revenue, decreases cash flow by holding the cash in goods form and preventing from being put to use elsewhere. Thus, the less excess inventory, the better cash flow and more profitable the company can ultimately be.
As a retailer, you will never be able to sell ALL of your inventory at full price. Excess inventory is inevitable, being caused by many different reasons, such as unexpected weather fluctuations, economic instability, change is customer behavior, and credit issues and purchasing setbacks, all things that you cannot completely plan for. However, you can plan for needing to markdown your product to incentivize customers to purchase.
Retailers aim to create and implement inventory solutions to grow their brand, and optimize their inventory. And technology is essential in this process. Utilizing tech to understand what is selling where, when, and at what price can help retailers plan product phase-out and lifecycle better.
However, most companies ignore their internal backend technology systems, unintentionally stunting their potential business growth and success. These legacy systems, that have seen very limited innovation in decades, typically form the foundation of the company's operations. Such systems are inventory management, image management, markdown optimization, and invoicing. While about 36% of brands have a plan of how to go about this, 72% are still in the process of looking to update their systems, a promising number given the role technology is currently playing in redefining retail.
This is where INTURN comes in. We make off-price easier for everyone with the newest technology platform on the market.
Our solution empowers both brands and retailers to use automated workflow tools, a powerful pricing optimization engine, and business intelligence to gain visibility of their businesses and earn more money, sooner.
Our experts have put together a guide to successful markdown planning. Are you ready to give it a try?