<span id="version" style="color: grey; float: right">Version 2.0.0</span>


# Markdown optimization
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 Markdown Optimization is vital to strategic decision-making for retail pricing, planning, trade marketing/revenue growth management, and merchandising teams. With a Markdown Optimization solution, retailers will have automated pricing and promotion insights that result in improved margins, increased sales revenue, greater sell-through rates, and lower inventory levels.
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 The dynamic retail environment is challenged with dwindling profitability in the face of supply chain disruptions, fluctuating fuel costs, inflationary headwinds, and shifting consumer behavior, just to name a few. These factors make it essential for retailers to adjust quickly to remain profitable and competitively advantaged. Retailers can improve margins by determining when and by how much to mark down products–whether this is done through planned (e.g. discount decisions due to seasonality or special promos) or unplanned (e.g. discount decisions driven by unexpected changes in consumer tastes) markdown decisions. Markdown optimization, however, has often been a manual process for retailers, resulting in loss of valuable time, underwhelming results, missed targets, and reduced profits. However, with advanced analytics, retailers can embed agility into their markdown decisions and improve margins through proactive planning and measurement. </div>

:arrow_forward:  The **Markdown Optimization** solution will let you customize the parameters around markdown for each product and find the best discounts corresponding to your business goals.

# Strength of Markdown optimization
## Visibility
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With an advanced analytics markdown solution, retailers are no longer limited to a narrow view of data that restricts their ability to maximize returns. A markdown optimization solution gives line-of-sight to and integrates current and future product demand, inventory levels by geography, product attributes, seasonality, existing markdowns, and most importantly, price elasticity to dodge costly mistakes like overstocking.</div>

## Price elasticity

![markdown_elasticity.png](ZDGrn5UrDGcj)

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Price elasticity measures the change in demand (quantity demanded) for the respective price change; in short, price elasticity measures consumer sensitivity to a change in price. With a markdown optimization solution that uses product attribution to estimate the unique elasticity of each product, retailers can predict their consumers’ sensitivity to price changes and reduce the risk of lost sales by establishing a better depth of discounting to grow sales.</div>

## Inventory management
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Minimizing waste is a common challenge for retailers reliant on a manual markdown process. But with an ML-driven Markdown Optimization tool, inventory waste reduction is achievable by identifying loss from markdown and predicted changes in demand and pricing. In turn, sell-through rates are improved, resulting in reduced inventory waste.</div>


## Retail margin

![markdown_summary_2.png](RXkE69rfFvf7)

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Finding a balance between the depth of discount and discount frequency on the right items is important for any retailer to establish. Without this balance, the margin can erode from going too deep or too frequently. For example, there is also the risk of losing consumers if the right value is not delivered at the right time. Another consideration is protecting high-margin, high-velocity items from unnecessary markdowns through SKU rationalization to understand the productivity of each SKU in the set–both high and low performers. A successfully implemented Markdown Optimization solution helps retailers identify the optimal price for a product–unlocking the ability to project impact, simulate scenarios, and protect margin through improved strategic planning. </div>
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 ![markdown_summary_1.png](Vkgd0OjYWb7F)
 
Investing in a solution that combines advanced analytics with strategic markdown capabilities will help eliminate erroneous assumptions from fragmented data and shortsighted timeframes to equip category managers (buyers), strategic planners, and pricing analysts with the insights needed to better inform their pricing decisions for the correct product categories, in the suitable locations (i.e. regions, markets, stores, climates/weather conditions), at the right time. The successful implementation of markdown optimization, as reported by McKinsey, can improve margin rates by 400 to 800 basis points (https://www.mckinsey.com/industries/retail/our-insights/hitting-the-mark-why-markdowns-matter-more-than-ever). With the right markdown optimization solution in place, retailers will be well on their way to consistently delivering value to the changing consumer while realizing profitable growth. 