Study offers tips on how to beat reduced markdowns

Markdowns pose a significant — and costly— problem in retail, but a new study suggests they can be resolved.

According to “Revealing the Hidden Costs of Poor Inventory Management,” a survey of 200 U.S. retail decision-makers by Coresight Research and predictive analytics platform provider Celect, U.S. non-grocery retailers lost $300 billion in revenues due to markdowns in 2018, equivalent to 12% of their total sales. Only 60% of U.S. non-grocery sales were made at full price.

When asked to estimate how much various factors contributed to unplanned markdowns, respondents said the largest share came from reduced demand due to external factors (31%), closely followed by overbuying inventory (30%). Other factors included buying the wrong type of products (16%) and misallocated inventory (7%).

Fifteen percent of retailers sold all or almost all (90-100%) of their inventory at full price during 2018. Roughly half (49.5%) were able to sell 70%-100% of their inventory at full price during that period.

To combat the issues causing markdowns, 86% of respondents said advanced analytics can be useful in selling more product at full price. When these respondents were asked to specify areas where advanced analytics are useful, 43.5% said advanced analytics are useful in informing key inventory management decisions such as how much stock to buy. Other popular responses included planning promotions (36%), and anticipating trends (34%).