When seasons come to an end, retailers clear their inventory to make room for new lines and styles of products. Shovels and snow removal equipment make way for gardening tools and grills, while boots, mittens, and scarves are replaced on the shelves by light jackets, t-shirts, and swimwear.
Retailers take several different approaches. For those with warehousing availability and products that can be stored and sold next year, they’ll take their winter inventory off the shelves and lock it away until the weather starts to change again.
Storing merchandise ends up hurting retailers’ bottom lines. Over the course of storage, products will often break or get ruined. Those products that don’t get ruined still end up costing the retailer in terms of warehousing. Ideally, most retailers would prefer to reduce their investment in storage space, but lacking an alternative, they continue to pay high prices to store products that are depreciating in value.
Meanwhile, products that are updated each season, like fashionable gloves, are sent to the discount rack, where consumers can buy them at considerable discounts. Other retailers sell their unsold merchandise to discount stores, just to get those items off the shelves. These discounts hurt the bottom line, as they reduce the return on investment from the inventory.
Finding an Alternative Solution
Using a dynamic pricing engine that is tightly integrated with inventory levels and historical savings provides retailers with an alternative approach. While most people view price as it relates to profit, savvy retailers are able to use price as a way to reduce end-of-season merchandise without practically giving it away.
When connected to inventory levels and historical sales numbers, the artificial intelligence element of dynamic pricing can pinpoint the high season for selling each winter product. It might make the determination that shovels are in highest demand early in the season. However, as winter moves along customers are willing to pay more for their shovel. As the season starts to end, shovel sales drop.
Knowing this information, the pricing engine might recommend starting the season at a competitive price. Consumers are at the point where they can bargain hunt and try to find the best deal on shovels. As the season moves on and snow starts to fall, the demand for shovels is immediate. Since consumers no longer have the luxury of shopping around, retailers can increase the price of their snow shovels. As winter comes to an end and demand starts to drop, the pricing engine might once again start reducing the price of shovels, to ensure that the retailer doesn’t get stuck with extra shovels at the end of the season.
As a result of subtle price reactions to the need in the market, retailers are able to sell shovels at ideal prices for each point in the season, with a target of limiting the amount of merchandise they have to store or heavily discount.
When the season ends, the goal is to limit the amount of merchandise that needs to be put on clearance racks, thrown into discount buckets, or sold to discount retailers.
When used effectively, retailers can reduce their storage space, cutting down on inventory expenses and reducing the amount of money they have tied up in products that can’t be sold until the following winter.
Don’t Miss This Opportunity
There’s still time to implement dynamic pricing before the seasons switch. Contact Quicklizard today, and we can have your dynamic platform installed and running in just 14 days.