Markdown Lowdown Erin Hulce and Miklos Eros

Retailer’s Finances  The Merchandise Budget  Retail Accounting Statements  Inventory Valuation

Managing a Retailer’s Finances  Merchandising: Planning and control of the buying and selling of goods and services to help the retailer realize its objectives

Merchandise Budget 1. Anticipated Sales 2. Stock on hand 3. Reductions 4. Additional Purchases 5. Gross Margin

Planned Retail Reductions  Not all merchandise is sold at actual markup price  Allowances for reductions should be made  Major item in budget subject to constant change  Sale-priced items increased from 8% of U.S. retail sales in 1971 to 78% of sales today

“Retailers who recognize that reductions are part of the cost of doing business and plan appropriately will achieve higher profits”

ProfitLogic  Helps retailers gauge when, where, and how to markdown prices  Identify products and determine best way to price to generate highest gross margin dollars  Used during entire lifecycle of merchandise  Retailers able to improve inventory and able to mark fewer items down  Top priority is getting highest return on inventory investments

Some of ProfitLogic’s Customers  Gap, Inc.  Ann Taylor  American Eagle  The Children’s Place  Bloomingdale’s  Charming Shoppes  JCPenny  Marshall Fields  Target  Nordstrom  Marshall Fields  Sears  Shopko Stores  Toys R Us

The GAP  International specialty retailer  Clothing, accessories, personal care items  Stores in U.S., United Kingdom, Canada, France, Japan, and Germany  1,300 U.S. stores  Fiscal 2002 sales $14.5 billion 

The Gap  All stores received same sizes and styles without much regard to local needs  Some sizes were always sold out and other sizes were always having to be marked down

The Gap  Gap began using ProfitLogic after seeing benefits Old Navy gained o Financial benefits o Quick return on investment o Seem-less integration  Using system to send unique assortments of sizes to particular stores  Determine optimum timing and amount for markdowns

“We are not deploying technology for technology’s sake. Everything we do has the customer in mind and we are constantly looking for better ways to improve the customer shopping experience.” - Calvin Hollinger VP Information Technology Gap, Inc.

References Dunne, P.M. & Lusch, R.F. (2005). Retailing (5 th ed.). Mason, OH: South-Western. Schlosser, J. (2004, January 12). Markdown Lowdown, 149, 40. DMReview.com Web Editorial Staff. (2003, June 20). Industry Implementations. Retrieved April 27, 2005 from: