Price Management for Non Food RetailersChallenges and solutions forIn Season OptimizationAriel Aubry - EBC Business Consul...
Content Challenges Principles Benefits Price Management for Non Food Retailers ...
Non Food Retailing is undergoing profound changes In today’s competitive economy, retailers have to face profound challen...
… which calls for more reactivity in Planning and In season Management ...
Price Management becomes one of the key challenges … Marketing dynamics become more geared towards deals communication, ...
… in a difficult contextHurdles are indeed numerous Volumes are extremely large, in particular in the Apparel Industry ...
Markdown Management is one of the key In Season Activities Assortment Asso...
Markdown Optimization ...
Markdown Optimization2 – Performance Analysis Natural Demand – Initial estimate ...
Markdown Optimization3- Scenario Analysis Triggered Updated Demand Markdown Strategy ...
Markdown Optimization4-Optimal scenario Selection Inventory Initial inventory ...
This approach requires strong analysis and simulation capacities Understand the « elasticity » Price Sale, Make an estim...
Standard Operating Procedures R : Responsible A : Accountable C : Consulted
Benefits of an approach with a Markdown Management Solution Improvement of the Profitability with margin increase, invent...
About EBC Business Consulting…EBC Business Consulting is a Management and Operational Strategy consultingfirm, specialized...
64 rue du Ranelagh75 116 ParisFrancePhone: +33 (0)1 56 90 50 40Mail: ariel.aubry@edifixio.com
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Price Management For Non Food Retailers

Challenges and Solutions for smart In Season Management in the Retail Non Food Industry
Published on: Mar 4, 2016
Published in: Business      Technology      
Source: www.slideshare.net


Transcripts - Price Management For Non Food Retailers

  • 1. Price Management for Non Food RetailersChallenges and solutions forIn Season OptimizationAriel Aubry - EBC Business Consulting
  • 2. Content Challenges Principles Benefits Price Management for Non Food Retailers 2
  • 3. Non Food Retailing is undergoing profound changes In today’s competitive economy, retailers have to face profound challenges not only in terms of buyers purchasing patterns but also in their competitive landscape Purchasing patterns for seasonal goods are evolving drastically In the Apparel market for instance • Markdowns account for close to 30% of sales revenue in some European countries. • Only 25% of all goods at sold at their introductory price, during their 1st month on the market • Most goods are sold at a discount price during sales, and 20% end up in unsold goods In the Electronic goods market, the growth of ecommerce and shopbots on the Internet triggered a price war on many categories … Consumers are becoming professional purchasers, hunting more for bargains than for the required product, the best quality, the right Brand, or the proximity In some Market, like Apparel for instance, the competitive landscape has changed durably with the success of International Chains (such as H&M, ) With their influence, far greater than their actual weigh on the market With their low cost positioning, triggering impulsive purchases, and their highly efficient marketing campaign with VIP and famous designers With their large number in season collections, enabling to renew constantly their assortment and to acquire more customers Price management for Non Food Retailers 3
  • 4. … which calls for more reactivity in Planning and In season Management BEST inventory OUT BEST SLOW Measure Top seller / worst seller POS performance Benchmarks Promotions Inventory Sales Drive Analyze Engagements YTD /TargetReplenishment Updates Engagements Simulate Assortment Strategy 14 12 / Decide POS Engagement 10 Prices and markdowns 8 Sales Forecast 6 4 OTB reassignment 2 Reconciliation with the financial planning 0 1 2 3 4 5 6 7 8 9 10 Price management for Non Food Retailers 4
  • 5. Price Management becomes one of the key challenges … Marketing dynamics become more geared towards deals communication, where the key is to push the best offer at the best time, while optimizing financial performances in terms of revenue, GM, inventory. To achieve this, retailers require excellent execution in Product Lifecycle Management, and therefore in Price Lifecycle Management and markdowns. The key becomes being able : To select the best product to markdown To assess the depth of the markdown to reach the Financial Target To select POS where the markdowns should be effective To Plan the best timeframe to offer the markdown, per POS To synchronize all operations (flows, contracts) To optimize the performances of all markdowns, following costs, ROI, Price image, loyalty. Price management for Non Food Retailers 5
  • 6. … in a difficult contextHurdles are indeed numerous Volumes are extremely large, in particular in the Apparel Industry which has to deal with size and color variants per POS Cycle times are getting shorter and shorter requiring extreme reactivity Estimating the Financial Impact of a markdown on revenue and margin is complex Analyzing multiple markdown scenarios (product, POS, time) is exponentially complex, making manual computation impossible Must have data are often distributed in multiple heterogeneous systems Data analysis is complex and filtering out the impact of seasonality, local competition, weather, local promotions, etc. is difficult Organizations rarely have the capacity to enforce strict pricing processes, among a large number of actors (central, local) with the right skills and data. Demand forecasting on products with a short life cycle is a complex task The scorecard of each scenario highly depends on the capacity to analyze and act at the finest level of detail (item/POS) Price management for Non Food Retailers 6
  • 7. Markdown Management is one of the key In Season Activities Assortment Assortment Financial Planning Allocation Strategy Planning • Planning (Sales, margin, • Assortment • Product Demand Plan • Item/Store/Time receipts, inventory, guidelines (collections • POS Buy/Receipt Allocation inventory turn, markdown) and themes) Plan • Inventory • Product and Location • Assortment Depth • Item Lifecycle Plan Financial Planning and Breadth according • Item/week/store to Store capacity Plan INITIALIZATION IN SEASON OPTIMIZATION Markdown Optimization 1. Item/POS Demand Forecasting 2. Performances Analysis 3. Scenario Analysis 4. Optimal Scenario selection Price management for Non Food Retailers 7
  • 8. Markdown Optimization 1 – Demand Forecasting at the POS level Demand versus price variations Natural Demand item POS 1 1,200 $25.00 Seasonality 1,000 $20.00UNIT SALES AND UNIT INVENTORY / 10 800 $15.00 PRICE 600 $10.00 400 Tract $5.00 200 Démarque 4/1/2000 - $- 4/15/2000 1/8/2000 1/22/2000 5/27/2000 6/10/2000 7/8/2000 8/5/2000 9/2/2000 9/30/2000 9/18/1999 2/5/2000 2/19/2000 3/4/2000 3/18/2000 4/29/2000 5/13/2000 6/24/2000 7/22/2000 8/19/2000 9/4/1999 10/2/1999 10/16/1999 11/27/1999 12/11/1999 12/25/1999 9/16/2000 10/28/2000 11/25/2000 11/13/1999 10/14/2000 10/30/1999 11/11/2000 Other (oos, weather) Noël Demand item POS 2 Triggered Demand item POS 1. Forecast the Natural demand at the item POS level based on The relationship between demand and price variations (elasticity) The seasonality External events 2. Forecast the Triggered Demand at the item POS level taking into account The natural demand The commercial Plan Planed markdowns Price management for Non Food Retailers 8
  • 9. Markdown Optimization2 – Performance Analysis Natural Demand – Initial estimate Top performing Items Actual sales Natural Demand – Reviewed Under performing Items Item/POS performances follow up - revenue - inventory - inventory turn - POS benchmarking - OOS Re calculation of the Demand Curve Under performing items detection Permanent update of the Demand forecast to detect under performing items Price management for Non Food Retailers 9
  • 10. Markdown Optimization3- Scenario Analysis Triggered Updated Demand Markdown Strategy frozen periods, minimum time between 2 markdowns min/max level for initial and consecutive markdowns maximal number of markdowns … 1 – Automatic recommendation of the markdown for the under performing items 2 - Creation of optimization scenarios 3 - Analysis of the estimated performances for each scenario 4 – Optimization within the available markdown BudgetsFrom the updated demand, creation and analysis of scenarios enabling the optimization of the under performing items Price management for Non Food Retailers 10
  • 11. Markdown Optimization4-Optimal scenario Selection Inventory Initial inventory Forecasted margin 25% Optimized margin 35% Excess inventory Target margin 40% Final inventory Time Actual sales / Forecasted sales Sales optimized with the markdown Target sales Selection of the scenario optimizing the performances of the revenue, the margin, the inventory, within the markdown budgets Price management for Non Food Retailers 11
  • 12. This approach requires strong analysis and simulation capacities Understand the « elasticity » Price Sale, Make an estimate as reliable as possible of the future performances according to the past performances Compare at multiple consolidation levels, actual performances with targets Estimate the impact of the markdown on the demand, revenue, GM and inventory level Follow and analyze performances with each of the key axis (inventories, revenue, GM, POS) Compare actual performances with targets performances Manage efficiently large volumes of data Encourage collaborative work to accelerate the decision making process, and assure its follow up and traceability Enforce any decision quickly to maximize its impact. Price management for Non Food Retailers 12
  • 13. Standard Operating Procedures R : Responsible A : Accountable C : Consulted
  • 14. Benefits of an approach with a Markdown Management Solution Improvement of the Profitability with margin increase, inventory decrease (gross margin improved by 5 to 15%) Improvement of revenue and margin forecasts with detailed demand modeling and follow-up Improvement assortment rotation, with a better inventory flow (improved by 5 to 20%) and an optimized management of the end of life items Improvement of operational efficiency by an optimization of the number of price changes and an overall consistency Return on investment is less than 6 months Price management for Non Food Retailers 14
  • 15. About EBC Business Consulting…EBC Business Consulting is a Management and Operational Strategy consultingfirm, specialized in the Service Industry (Retail, Insurance and Assistance, HR, etc)EBC Business Consulting help C-level executives execute their strategy, helpingthem shape their vision into strategic initiatives and deploying them throughouttheir organization.Our services offering encompasses Operational Efficiency Improvement,Company or Key Program turn around, IT Strategy and planning, BusinessProcess Optimization, Change ManagementEBC Business consulting is an independent management consulting firm withlocations in Paris, Boston (USA) and Calcutta (India)For more information, please visit our website at www.ebc-businessconsulting.fr,consult our white papers or follow us on blogs and social networks Price management for Non Food Retailers 15
  • 16. 64 rue du Ranelagh75 116 ParisFrancePhone: +33 (0)1 56 90 50 40Mail: ariel.aubry@edifixio.com

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