Can Inflation Help Retailers Increase Market Share: A Strategic Approach to Managing Markdowns in the Current Era

By Fran Ellis, Senior Director, DemandTec

Let’s step over a penny to pick up a thousand-dollar bill…sound good? 

That’s what a select group of visionary retail leaders did when they introduced advanced data science into their organizations in the early 2000s.

More than 20 years ago, I made the transition from retail merchandising to working for a retail software company that offered what many thought was a “crystal ball.” In those first few years, I had the privilege of working with some of the most innovative visionary retail leaders in the world. Blake Nordstrom (Nordstrom), Aldo Bensadoun (ALDO Group) and Sam Moses (Walmart). These innovators made an investment in pricing technology – ahead of many of their peers – and captured millions of dollars in additional profit. They came to their own conclusion that merging the art and science of retail was a must-have to win in their segments. Today, data science is now table stakes for competing in the modern era.

They all understood the value of the voice of the customer (VOC), and the power of knowing how they would likely respond to prices, brands, and assortments. But these visionaries also understood the value of math, algorithms, and data science. They were among the first retail executives to lead their companies to use the power of markdown optimization to drive the most profitable and timely conversion of inventory, making space on their shelves and floors available, and liberating working capital for the next assortment flow of exciting merchandise.

The next generation of retail visionaries
Now is the time for the next generation of retail visionaries, as retailers are dealing with new and unusual dynamics. Two key dynamics they are facing today include, a high percent of holiday merchandise is just clearing the ports across North America and around the globe. Retailers of all sizes will be challenged to sell more than 2.4 million containers worth of inventory when peak demand has passed. The second challenge, which builds on the pain, is inflation. As retailers are forced to pass on cost increases to customers, we urge them to not just raise prices across the board, but to use modeling and data science to intelligently assign prices based on demand and price elasticity factors. This is a more surgical approach to increasing prices or to passing on savings to the customer so the retailer can maintain and even grow market share during these high inflationary times. Don’t drive your customers to your competitors or trade them down to dollar stores. The key is balancing intelligent pricing of delayed post-peak season merchandise with inflation and rising costs calls for advanced and autonomous pricing science.

The good news: pricing and demand intelligence has evolved exponentially with the advances in AI and machine learning to allow real-time updates to models. This is a paramount need as the pandemic continues to rage and customer-demand fluctuation is unprecedented and unpredictable. DemandTec’s Autonomous Markdowns offer the most advanced science in the world – when retailers need it most. Retailers cannot solely rely on dated historical models.  Understanding real-time customer demand as models are updated weekly is the winning solution.

As a retailer, do you believe frequent updates to pricing models and elasticities could help you surgically place the right price at the right time, depth, and channel or store? This could offset inflationary price increases across the board — compounded with the post-peak deliveries flowing into your warehouses — to maintain or grow market share. Let us know your thoughts!


Fran Ellis is a retail pricing and merchandising expert having passionately worked across all retail segments, uniquely collaborating with retailers globally to understand their challenges and initiatives to find the most valuable solutions to drive efficiencies, profitability and market share. Fran held executive roles with the Gap, Macy’s, and worked with grocery and mass merchants before joining the retail software space working for ProfitLogic (acquired by Oracle) and other leaders in retail software solutions.

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