‘Markdown Mania’: Is It Worth It?
5 July 2019
Author: Jasmine Waters
Summer is now in full swing, meaning retailers may once again be looking to discount their wares, despite potential risk. With H&M reporting a sale rise of 11% from positive results due to a strategy shift last week, it leaves us asking the question – how much of a positive difference can discounting make, and how can markdowns be limited?
Following on form their profit success story, H&M have cited their increase to “ongoing transformational work”, “more full-price sales, lower markdowns and increased market share”. Even so, markdowns should not necessarily be regarded as something bad. When assessing markdowns in terms of strategy, they should always be part of a retailers seasonal and annual plan, and factored into financial performance expectations. We know that the fashion industry can be volatile and extremely unpredictable, so once again strong advance planning is essential (making buying selections 6 to 12 months in advance should be an ballpark figure to aim for).
What should I consider for my markdown strategy?
- The strongest foundation to have in place when considering seasonal markdowns is a solid supply chain. This can help to reduce lead time and may provide some flexibility when seasonal orders need replenishing, helping to compensate if sales are slowing.
- Making sure timely product receipts are kept is another way to ensure markdowns are kept to a minimum, as compensation could be open for negotiation if goods deliveries are late and not within planned guidelines, or have created surplus.
- Distribution will also play a key factor in the stages of planning and execution, particularly for larger or multi-store retailers. Making sure the right quantities are routed to the right locations limits markdowns being made because of poor distribution decisions or coping with products sell-outs.
- Ensure your reactions as a retailer are quick to counteract ‘slow sellers’. Underperforming items will only accumulate quantity until liquidation, resulting in huge end of season markdowns. Don’t wait to hope that sales of a certain product will suddenly pick up - instead take a healthier initial markdown as soon as possible. The old saying “the first markdown is the best” can in fact reduce markdowns in the long run to free up finances for better performing products.
As long as your buyers are happy, markdowns are always going to lead to some sort of positive outcome. The theme that remains a constant in making that successful is execution – implementing the above strategy staples involve the discipline good execution brings with it, allowing retailers to navigate the minefield of sales with as much ease as possible.
Photo credit: https://herutna.org