Analyze the Details About Your Markdowns

Chances are that you're keeping records on when you mark down prices on your merchandise. You need that information for accurate financial accounting. Did you know it's valuable to also keep and analyze records on the reasons for the discounts and on both the percentages and the dollar amounts of discounts? The more you can reasonably do of this, the more accurate you can be in making best use of discounts in the future.
     Keep the recordkeeping simple. Have a checklist for the most common reasons your store marks down prices: To match or beat what the competition is charging? To create excitement that will draw in customers? Because it's nearing the end of the season? To reward purchasers of merchandise or packaging which looks as if it's picked over? To reduce stock accidentally ordered in excess? To sell off product lines or assortments your store is ready to phase out?
     Markdowns are most effective when shoppers feel they know the reason for the discount, so use your analyses to decide how to best present the markdowns.
     Track the timing of your discounts, especially when you have a series of markdowns on the same items. Researchers at Syracuse University and at Korea's Sogang University found that for some sorts of product lines, sales increased most when the retailer used a series of discounts, such as each at 20%, rather than a single large discount. But for other sorts of product lines, the progressive discount strategy doesn't boost sales enough, or even worse, the shoppers become convinced it's better to wait to purchase since the prices will soon be going down further.
     When you analyze the data you collect about markdowns, you'll be able to tell which discount tactic to use with each major class of merchandise.

For your profitability: Sell Well: What Really Moves Your Shoppers