Fashion companies are feeling the pressure because of margin reductions. However, according to McKinsey, they don’t make proper use of technological resources to fix the situation.
Big data, the shield for margins. Most companies in the fashion system are suffering margin drops every year, due mainly to price deductions and the rise of promotions. The Pairing advanced analytics with intuitive tools to transform retail markdown management, report by McKinsey, points that companies are not using technological resources to work with sale season in an efficient way.
Companies tend to use the same sale season strategy for all product categories, not taking into consideration its performance or in-store positioning, points the consulting. The report explains that retailers are not paying enough attention to the market calendars or doing benchmark to see what competitors are doing.
In terms of decision making for sale season implementation, McKinsey explains that companies must answer four questions to be able to improve the margins between 4% and 8%.
To make sale season more effective, companies must identify the client’s behavior inside the store
The consulting suggests these questions: what items should be positioned based in their season performance? In what placement inside the store? When do sale season begins? What sale percentage belongs to each category?
Once the sale items are identified, and positioned, its necessary to stablish the correct sale price. McKinsey points that for this, companies can use big data to check consumer’s preferences and the money they are willing to pay.
The report also points that retailers must analyze the percentage of discount given to each item according to its distribution channels. For example, a wholesaler’s discount percentage should be more than 25% off its original price, while mono-brand stores can reach 30%.