Duane Reade improves margins with web-based demand management

Duane Reade, a New York-based chain of 237 drugstores, is implementing DemandTec Inc.'s DemandTec 3 web­based demand management system after a pilot program proved it helps to move more products at higher prices, said Gary Charbonneau, the retailer's senior vice president of merchandising.

"The predictive capability of DemandTec 3 helps Duane Reade to select the best pricing strategies to meet our corporate objectives," he said. "We are able to use DemandTec to be more competitive."

"Using DemandTec, we were able to accurately predict item movement based on pricing scenarios," he added. Duane Reade tested pricing scenarios based on increasing gross margin and on increasing unit movement, and the DemandTec system accurately projected higher margins and more unit movement than the retailer would have predicted without the system, he said.

Duane Reade piloted the DemandTec 3 system earlier this year, covering non­pharmaceutical products such as household items and toiletries. It now plans to roll out the system for non­pharmaceutical products in all of its stores under a multi-year agreement with DemandTec. "We are applying it to 123 subcategories of products and hope to have the implementation complete in all non-pharmaceutical categories by the first half of next year," Charbonneau said.

The DemandTec 3 system is a suite of merchandising applications that integrates with DemandTec's demand­based management platform. The suite provides analysis of consumer buying preferences and pricing history contained within Duane Reade's POS data. The DemandTec Price and DemandTec Promotion modules analyze and forecast the impact of price changes for individual items, then recommend pricing to maximize sales at the highest margins.