Month: September 2022

Offering excessive discounts during the sales season can be quite tempting to clear ageing inventory, however, discounts not only slash profit margins significantly but, if done without the right strategy, can impact your brand image. Once customers get used to low price points, they can become reluctant to buy at full price and end up waiting for the clearance sale to make their purchase. This behaviour impacts regular cash flow, and brand reputation, and dilutes customer trust in the genuineness of the price. 

A good pricing model paired with an effective discounting strategy helps maximize business growth and promote sales without hurting the business. Here are some discounting techniques to make your business more profitable.

1. Flat discounting vs Slab discounting

Applying a flat/blanket discount on all products can shoot up discount payout dramatically, affecting profit margin by treating them all the same. Rather than offering flat discounts, brands can give higher discounts on selected assortments, e.g. seasonal items or refurbished items, and earn higher margins on good inventory. This kind of slab discounting helps brands earn better margins by discounting the products right based on their true value. Increff Merchandising solution is designed for flexible discounting, it allows retailers to adjust prices on a daily basis, based on fluctuating customer demands. 

2. Gift-with-purchase (GWP) & Purchase-with-purchase (PWP)

Offering a free gift with purchase is an effective cross-selling strategy that helps customers get excited at the prospect of saving money and getting a higher value for a bundle of products. Offering customers an option, e.g. “buy two, get one free”, can be a smart way to reduce discount pay-out and clear more stock. Another sales promotion technique, PWP, offer discounts only on the purchase of a second or third product. This is to entice customers into buying a threshold of products to avail of the offer. 

Both strategies ensure that products are not devalued or the brand reputation is not diluted. However, if the discount is not well planned and executed, there is a high risk of giving away expensive stock which could cause serious losses to the brand.

3. Right marketing strategy during discounts

Expiry dates and limits on discounts help build a sense of urgency that urges customers to make the purchase before meeting the deadline. It’s difficult to ignore compelling CTAs, or calls to action. Statements like ‘Exclusive offer to the first 30’ or ‘Get it NOW before it’s GONE’, are persuasive strategies to raise a sense of scarcity that pushes customers to take immediate action.  

Right visual merchandising

Attractive store-front and catchy window installations, in-store displays, racks, eloquent signage, point-of-purchase displays, etc. can be good techniques to attract customers. Once inside the store, eye-catching story displays, appropriate lighting, attractive interior designs, easy-to-navigate store layouts, etc. help create a delightful, customer-friendly environment. Increff Merchandising solution considers business constraints of planogram and operating plan to design a store plan. A well-planned store encourages customers to spend more time in it, thus exposing them to maximum merchandise and boosting chances of sales. 

5. Spread out the discount period

To accommodate the rush and avoid system glitches, it’s best to spread out the discounting period. Brands often struggle with a sudden spurt in customer footfall due to a lack of floor space, staff, or the right technology. The same is true for online shopping where a sudden spike in web traffic can cause server issues, or create bottlenecks in the supply chain. Rather than offering discount sales for one or two days, it is highly recommended to extend the period to a week or more and avoid operational nightmares. Integrating a robust technology solution for inventory and order management can help brands avoid order cancellations, delays in order fulfillment, and poor customer shopping experience.  

6. Reward loyal customers

Instead of offering the same discounts to existing customers, it is far better to personalize offers and add value for loyal customers. They are the business builders: they buy more, pay premium prices, and bring in new customers through referrals. Realizing the benefits of loyalty requires an admission that not all customers are equal. In order to maximize loyalty and profitability, a company must give its best value to its best customers. Offering gift coupons, discount vouchers, and loyalty points to buy groceries or other fast-moving products from a partner brand, or getting a healthy discount on frequently purchased products like milk, vegetables, and cereals can encourage customers to buy more.

7. Offer discounts to first-time buyers

Customer acquisition can be a formidable challenge. Apart from offering rewards and offers to loyal customers, it is beneficial to prioritize first-time buyers. By taking them through the rabbit hole of your offerings, brands can encourage first-time buyers to try new products. This strategy has successfully been used by fashion brands such as H&M and Bloomingdale’s in the form of offering 10% off on the first order. 

8. Track your promotions

Track your marketing campaigns to know how effective they are. Online Analytics module in Increff Merchandising solution helps you understand the changes in page views and conversion rates, through which you can understand how effective promotions were. You could take appropriate calls to retain, increase or discontinue the offers on the products.

9. Do smart buying

If your core idea of discounting is to get rid of excess inventory and make space, do smart buying in the first place and avoid the clutter of excess inventory. Increff tool helps you create efficient buying and reordering plans that will let you keep the optimum level of inventory. With this, you will also suffer fewer stock-outs and sale losses connected to the same.

Final thoughts

When creating a discounting strategy, avoid having a one-track mind. Instead, mix and match your options and use ample creativity to boost sales, reduce pay-outs and enhance the customer experience. Make discounting decisions 2 times faster with Increff Merchandising solution, Markdown optimization module, and sell more at the right price. 

As an established brand/retailer with a healthy spread of brick-and-mortar stores, in-season planning involves optimal inventory distribution to all points of sales. In-season planning can be categorized into, new season allocation, at the launch of the season, and mid-season replenishments and replacements. Planning involves budget allocation, trend analysis, past sales analysis, etc, which gets half of the job done, but the incorrect distribution leads to a failed season.

There are a lot of factors like store capacity, variety of options, depth of the style/SKU, grade of the store, assortment mix, etc. that are involved in optimally distributing the available stock across multiple points of sales (PoS). Incorrect allocation leads to overstocking, understocking, and loss of potential sales which affects the top and bottom line.

After the new season allocation, the inventory has to be replenished based on the current sales trends to keep the sales momentum going. The health of merchandise and identifying the right stock for the right store are major factors that have to be considered during the mid-season.

Since the whole process involves a lot of resources, time, and accuracy, new-age solutions like Increff Merchandising Solution can automate the process by reducing the number of resources required, the time taken for completing the process, and increasing the accuracy.

USPs

• Attribute Group-based new style allocation: Existing styles can be allocated based on their historic performance at the stores, which is not straightforward for the new styles that don’t have any sales history. MS Pro uses attribute group performance for new style allocation.
• Style-Store Ranking: Placing the right inventory at the right PoS is very important in catering to customer demand. MS Pro uses style-store ranking based on the historical performance of the style at the store and allocates the inventory to the best store followed by the second best, and so on.
• Maintaining inventory health: Inventory health plays a major role in the Rate of Sale (RoS). It is observed that the styles that don’t have important sizes available at PoS are unlikely to sell. MS Pro maintains inventory health by identifying the key sizes of a style during distribution.
• Individual PoS analysis: Every PoS, both online and offline, has a unique customer base and the behavior of the different points of sales is different. Grouping the PoS in clusters and analyzing clusters is not as effective. MS Pro considers each store to have an individual identity and defines the right assortment and key sizes based on past performance in that store for optimal inventory allocation.
• Maintaining fill rates at stores: Fill rate is the maximum inventory that can be stocked in a store. MS Pro maintains optimal fill rates at the store by using the planogram as a constraint.
• Seasonality-based assortment: Seasonality is an important concept in retail, especially in fashion as certain products have demand during a certain period. Eg., Jackets, sweaters, and other winterwear apparel are sold mainly during winters and have low demand during other seasons. MS Pro helps define the assortment plan based on the ongoing season.
• Rollup-based allocation: The allocation of the inventory is done at different levels when the right amount of data points is not available at any level. Eg., for any style, the data at store-AG is not available, a few rollups are done at the store-category level or store-category-subcategory level, and allocations are done at that level.

 Impacts Delivered

• 13% increase in-season full-price sell-through for one of the largest celebrity brands
• 25% revenue growth and 4% improvement in margin for one of the largest lingerie brand
• 13% reduction in inventory brokenness, for a leading formal wear brand
• Reduction in inventory holding from >120 days to 80 days for a leading lingerie brand
• 90% reduction in stock allocation & buying process for all the brands
• 13% improvement in stock health season on season, though regular replenishments and allocations for a leading formal wear brand 
• 45% additional sales from the same set of styles with 34% reduction in brokenness through Inter Store transfers for a Global Men’s Casual-wear Brand
• ~21.5% reduction in inventory quantity for a targeted increase in revenue by 17.3% for one of the largest health and beauty marketplace 

The Economist, in 2017, referred to data as “new oil”, the one ingredient every business needs to drive the world ahead. Covid, classified as a “black swan” event, shook the entire social and economic status quo, and further emphasized the importance of intelligent data analysis and smart decision-making. Brands and retailers had to take a fresh look at strategy and planning. Digital sales channels took precedence over offline stores enabling brands to take an omnichannel approach. Planning an efficient supply chain, to get the right product at the right time to the right person, became imperative.

Data analytics helps make strategic business calls and design processes, thus building supply chain efficiency, and fostering innovations. Businesses need to rely on data analytics to make quick business decisions in weeks, rather than months. 

Increff smart Merchandising Solution – MS-Pro and MS-enterprise, is making strides in data analytics as diverse data is processed by patented algorithms to produce downloadable reports that can be visualized in UI.

• Descriptive data analysis is provided through Business Intelligence dashboards. Here, dynamic performance analysis can be done with visualization techniques over historical data.
• Predictive analytics is used to identify past sales, revenue, discounting, sell-through, and other factors from past data to predict future behavior.

It helps in accurate demand planning and distribution to ensure the right products reach the right customers at the right time. A 10-20% improvement in demand forecasting can reduce 5% of the inventory cost, which as per McKinsey and Company, contributes to up to a 2% to 3% increase in revenue.

The pandemic influenced how people perceived and purchased products which were reflected in the drastic switch in brands with fluctuating demands. This dynamism was important to capture with data analytic tools so brands can identify buying patterns and capitalize on them.

Increff smart merchandising solution is designed to adapt and grow with the changes in the market.

• Results can be produced season-wise or period-wise depending on the purchasing and distribution pattern of the brand or retailer. It occupies budget crunches or expansions and optimizes accordingly. 
• Dynamic data-churning help cut down the length of production cycles and adapt to quick changes in the market.
• It gives the option to pick and choose an analysis period where a considerable amount of data is available. Data gaps can be identified while analyzing the data from similar seasons or sales periods that can be used to replace them.

• Ability to measure a set of attributes to track the performance of particular products and forecast demands accurately. This can be derived from the few basic sets of data, available with all brands. From here the tool can churn out right from planning to distribution to online analytics.
• The UI is clutter free and designed to create easy access for everyone. Easy usage cuts down man hours to a few minutes and enables the team to have maximum flexibility.
• Tools account for spikes and ridges in sales and smooth out any irregularity, thus making the results more accurate and avoiding false positives due to any season-end sales or extreme dips due to temporary shutdowns.
• Modules such as regional utilization and Inter-store transfer help to cut down on logistic time-cost and increase efficiency in supply chains. This would help your business stay afloat even in sudden supply chain disruptions. Tuning Inter-store transfer with the tool will eliminate human delays as well.

Intelligent Increff Merchandising Solution helps retailers put their best foot forward when it comes to planning inventory and allocation. The adaptable and dynamic nature of the tool helps brands cope with the natural data loss, similar to what happened due to business shutdowns during the pandemic, and take calculated decisions for steady business growth.