Businesses are always on the lookout for ingenious ways to attract new customers and keep their inventory moving. One strategy is applying markdowns, namely the deliberate reduction of the original prices of products to entice shoppers to buy or say goodbye to excess stock.
Of course, as all things, there is not only the good side to it. While markdowns can sometimes work like magic, they are often the cause of reduced profit margins and customer doubt in the true value of a brand’s products. After all, it’s not by chance that Louis Vuitton never goes on sale!
In this article we’ll discover how a 3PL can help you master your inventory management and ultimately reduce the need for frequent markdowns.
What is a markdown in retail?
A markdown in retail is an intentional reduction or devaluation of the original selling price of a product. Retailers utilize markdowns to clear out old or slow-moving inventory, making room for new products, and recovering some of the costs associated with carrying unsold stock. They are even a strategy to encourage customers to make a purchase.
Seasonal changes and product lifecycle
Markdowns are very important for some businesses, especially when they sell a diverse range of products, because in this way they make the most of each stage of a product’s life.
On the other hand, it is important to avoid the trap of mass markdown! Large-scale markdowns give the impression that products are always on sale, and customers may start doubting the value of your brand. In fact, you must always apply a targeted markdown strategy, focusing on specific products, client segments, or sales seasons.
Retail calendar
Paying close attention to the retail calendar is fundamental to apply markdowns with the correct timing. Black Friday and Cyber Monday can become opportunities to ride the wave of consumer demand and still stay ahead of competition without damaging a brand’s image.
How to reduce markdowns with eLogy
Markdowns can heavily impact profit margins if you don’t manage them attentively. They are often even a symptom of larger inventory issues.
With eLogy’s expertise, you can avoid overstocking and reduce the need for markdown campaigns. Thanks to eLogy’s powerful inventory management system, which allows you to access real-time data, demand forecasting, and order management tools, you can finally create a successful inventory strategy.
- Calculate essential inventory management KPIs like the Inventory Turnover Ratio, an essential metric that allows you to monitor how quickly inventory is sold and replaced within a specific timeframe. This will give you precious insights on how well your products are doing, allowing you to purchase just the right amount of stock.
- Determine stock availability, forecast demand, and the performance of your inventory thanks to real-time data. You won’t risk purchasing inventory in excess and you can easily avoid potential losses.
Although the occasional markdown may still be necessary and even a benefit for your business, with eLogy by your side you can leverage the power of inventory optimization, maintaining optimal inventory levels, healthy profit margins, and a focus on growth strategies that pave the way for long-term success.
