Minimising markdowns with enterprise order management

Simon Evetts

Most retailers struggle to minimise markdown budgets. Even those with strong stock optimisation capabilities will still always have to clear stock at the end of the season.  But it is possible to reduce markdown spend with a unified approach to sales and fulfilment.

In store, traditional approaches to clearing product with low demand are mostly limited to discounting heavily, moving to outlets or jobbing off to a third party – all directly hitting the bottom line. Any reductions that can be made to store markdowns will therefore help retailers combat the growing pressure on profits.

Online, where the far greater range of consumers means you are more likely to find demand for fringe sizes or less popular products, the level of markdown required to clear product is significantly lower than in stores. For multichannel retailers, this represents a significant opportunity to clear store stock via the web with a lower level of markdown. Some are already doing this by moving unsold stock from the store back to the DC. At itim, we prescribe a different approach made possible by enterprise order management.

Rather than transferring stock back to the warehouse, we advocate leaving stock in store but making it available to sell online and then shipping it directly from the store to the consumer. This approach brings several opportunities for cost saving:

1. The cost of shipping from store is typically lower than moving stock back to the DC.
2. Stock can be cleared with smaller markdowns due to the increased demand online.
3. Markdowns can be applied earlier and more incrementally (and by individual product) rather than having to mark down or move stock en masse.

With smart order routing logic configured by head office staff, when an order is placed (either online or as an assisted sale in a store) it can be automatically routed to the most profitable fulfilment point (or the location with the smallest loss) or even to the store most likely to incur the largest markdown if that product is left in store.  Where the desired stock is available in a customer’s local store, it can also be made available for rapid Click & Collect.

As well as minimising markdown spend, this approach also allows retailers to offer more flexible fulfilment options, improving the customer experience and driving sales.

What is in an enterprise order management system?

An enterprise order management system sits on top of your existing systems for inventory visiblity and connects to all your points of sale, providing real-time stock and available-to-promise (ATP) across all stores and DCs, increasing product availability and reducing stockouts. In-store mobile devices enable the pick/pack/despatch process to be handled by store associates in an efficient and paperless manner.

Implementing an order management solution can be done quickly and is well suited to a phased implementation with rapid payback periods. Typically, clients find that the reduction in the markdown budget alone will cover the cost of implementing the order management solution. 

Talk to us about our business case model for order management and we’d be happy to help you understand the benefits and ROI of enterprise order management.

>> Read more about our Enterprise Order Management solution