Markdown is not a dirty word

The last few weeks have been a blur of travel. Mostly work, some personal (Parents weekend!) Lots of lessons, and lots of opportunity to learn.  And now finally time to look back and make some sense, and try to put the pieces together.

First trip was to a Revionics Insight conference.  A great conference as always, but this year was especially interesting to me as we are ‘seasoned’ in base and optimization, and piloting a markdown. ( And I always enjoy when my team gets recognized as industry leaders by their peers as well, so an award was cool to receive as well)

Listening to the vendor, other progressive retailers, and some genius data science people (and there were a lot running around in one place), I had an epiphany that the way we handle MD is really wrong. It should not be an ‘event’, but an ongoing process.  And the way we have viewed these as a negative is also a little backwards.
Who said a discounted item has to be bad? We should be smarter. so here are That Planning Guys Super Secret Markdown Money Making Methods!
First: Lets not call them markdowns or ‘clearance’ or even discounted.  Lets call the items being ‘promoted’  Great positive word. Who doesn’t want a promotion?
Next, stop filtering out goods or vendors based on an opinion of the goods. Words like ‘Basic’, ‘core’, ‘current’ really are hurting the process. I want to take all items to evaluate effectively as groupings (or clusters, but more on that at a different time)
Lets spread the time frame of the promotion goods. They don’t need to be gone in 6 weeks… lets make it a process that can take time. The secret to making great food in a smoker is time and patience. A turkey takes 8-12 hours at low heat to be outstanding.   A markdown cycle may well be 8-12 weeks, but the results can be outstanding as well.
Let the optimization & analytics tell you what to do and when. Then the merchant decisions can factor in.  If the math says to promote (note: NOT MD!) an item, then the merchant can look to a RTV, stock balance,   or other means.  And if no means available, take the price change as prescribed.
In short… take all the goods that you have, and determine the exit date at the time of arrival, or even creation.  Evaluate as a whole group, whats the goals, whats the desired outcome?  Then let the math dictate the ‘smoke’.   Don’t get hung up on items considered ‘core’, as if the math says to promote, maybe they aren’t really meant to be core.

Selling items faster and more profitably do not have to be mutually exclusive goals.  If the goal is to liquidate fast, OK… But the goal should be to make money, more money, and lots of money.  Be smarter.

-That Planning Guy

PS- Next post will be talking about clustering and advanced analytics, another fun conversation from my travels.

Retail Bankruptcies

As Sports Authority knuckles under, I am taking pause to reflect on the 10 biggest Retail BK’s of all time, as written in this article from Fortune: Fortune Article Link

In order of assets at time of BK:
Circuit City, Linens & Things, General Atlantic & Pacific Tea (A&P),Radio Shack, Blockbuster, Borders, Sports Authority, Sbarro, Friedman’s, Brookstone.

Ruling out Sbarro, as it really is a restaurant chain and not a traditional retailer, and Friedman’s, which is a jewelry store that I am simply not familiar with,  what stands out to me is these were ALL very top or near-top of their category businesses at one point.

Circuit City was very similar to Best Buy in product and pricing. Linens&Things was sort of a small version of Bed Bath and Beyond (less Beyond, more Bed)
A&P was not just a large grocer: They had 16,000 stores in 1930– and were the largest retailer in the WORLD. (and 150+year history)
Radio Shack? Was a premier player in the PC market at the beginning- remember the TRS-80? Then you are old also. Founded in 1921, so managed to survive a few wars the Depression, and every other world-changing event for nearly a century.
Blockbuster didn’t invent the movie rental concept- but they certainly made it simple, accessible, and EVERYWHERE.
Borders? Put it next to a B&N and heck if I knew which was which.
Brookstone was the store that was FUN in the mall!

So what did these stores fail in while their rivals are still alive? Obviously a lot of reasons but the one that struck me as likely (in hindsight) was failing to adapt-or-die.
If Blockbuster had opened an online delivery, maybe they’d be Netflix.
If Radio Shack and Circuit City had figured out whatever it was that made Best Buy work, and opened enough online presence to compete with Amazon? Maybe a different story.
Radio Shack alone could have been a MONSTER- Introducing a home PC in 1977, for $600?  About the same time as that other computer maker startup, and that one turned out OK in the end.

What did B&N do better than Borders? I don’t know, but clearly neither did Borders.  I think they were both late to the online book situation, but obviously B&N survived. Adapted.

And A&P? Well that’s the scariest of all. How do you completely own a market and lose the entire company in a few decades?  Obviously competition changed.  The landscape changed.  Bad decisions must have been made.  But to have that kind of economy of scale and lose it is just a terrifying prospect for a lot of today’s market leaders.

If you don’t remember what got you there, it is hard to stay there, I think. 16,000 stores,  85 years ago.  That’s over 4000 more than Walmart has today. In 30 years, will a change in landscape not only over-through Walmart, but literally end them? Hard to fathom… but I bet A&P management in 1930 felt the same invincibility.

So today, lets all say a retail prayer for the staff of Sports Authority who likely lost a lot of jobs, and hope they can come through the other side leaner, smarter, stronger, and better able to compete. We are all retail brothers.
Note: Brookstone emerged from BK in 2014 and has continued operations, which is a joy for anyone who is at the mall and wants a chair massage!
Plan, execute, and analyze. Repeat.  And never stop. Never.

-That Planning Guy