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The Philosophy of Markdowns in Your Lingerie Business

January 20, 2014

By Ali Cudby

RETAIL-ASSEMBLY-Profitable-Markdowns-online-workshoSo far in this Lingerie Retailers Buying Series we have covered a lot of ground talking about Open to Buy, SKUs and overall buying strategy.

One question that comes up a lot when it comes to buying actually has to do with selling – namely, the philosophy of taking markdowns in your lingerie business. In this article, we will show how markdowns can actually make your business more profitable.

Markdowns can be a loaded topic in a lingerie business. There are successful retailers who never have sales, and those who rely heavily on markdowns.

Ellen Lewis sees markdowns as a critical piece of how a lingerie business survives and flows forward. One of her early mentors taught her, “don’t be afraid to take markdowns – remember, the first markdown is the cheapest.”

Here’s what that means.

In any retail business, sometimes a buyer makes a bad pick. You saw something at a show and believed in it, but then it didn’t work out on the floor, for some reason. You have a choice – hold the piece at the original retail price, or take a markdown.

The upside of keeping a piece at retail is obvious – full margin. So why take a markdown, and why is the first markdown the cheapest? Here are five reasons to consider:

Leaving inventory sitting out makes your store look stale.

When customers come into your store and see the same goods they saw last time, it sends the message that they have seen your inventory before. Customers want to feel like they are going to be enchanted when they come into your store, and seeing the same product as last time doesn’t create enchantment. Worse, you can even train your customers to wait longer between shopping outings when your store doesn’t look fresh.

Having broken stock messes with your visual flow.

When you are holding onto odd inventory from a previous collection, it gets in the way of a cohesive merchandising strategy. Winter’s deep fashion color sticks out like a sore thumb when contrasted against the brights and patterns of Spring.

You’re missing the moment with your shoppers.

retial_price_markdownsConsider a glitzy piece you’ve received in December for the holidays. If you mark that piece down at Christmas, you may be able to sell off that inventory when people are still considering their New Year’s Eve plans. If you wait until January – hoping to grab those full-price New Year’s Eve shoppers – then by the time you’re ready to put the garments on sale, shoppers aren’t thinking about glitzy, festive party-wear. They’re onto the austerity of New Year’s resolutions. You’ve missed the moment.

Old inventory is dirty inventory.

Every week an item sits in your store – both hanging idly and being tried on by customers – it gets dirty. Dirty merchandise is less appealing and harder to sell. There’s additional risk of visible wear and tear or even damage.

Most importantly, you have to keep the cash flow flowing.

You can’t pay the rent – or buy new inventory – on margin. You have to pay cash. Every item you don’t sell means fewer dollars to put toward new inventory, the latest promotions, the key items your customers want most for that particular season.

Missing an opportunity to get some profit from an item means you don’t have cash flow to put toward the next batch of inventory that you could sell at full retail price.

Cash is king.

There are many ways to take markdowns successfully – and that’s a topic for another day. No matter what you decide is right for you, understanding the philosophy of markdowns is the first critical step in making a strategic decision for your lingerie business.

 
COMMENTS
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  1. Lisa Romo Tuesday - 04 / 02 / 2014 Reply
    Wish I had read this article a couple of years ago as while all the points are so true, you often need to read or see if from anothers perspective to really understand it. Markdowns are a part of any business I suppose but definitely the lingerie business. Thanks for the read.