New Markdown Optimization Software Aims to Increase Retailer Profitability

AIS solution uses pattern recognition and artificial intelligence technologies to improve markdown decisions and strategies

AIS solution uses pattern recognition and artificial intelligence technologies to improve markdown decisions and strategies

Boulder, CO — March 1, 2006 — Retail merchandising specialist Applied Intelligence Solutions has debuted what it is calling its "next-generation" optimization solution to improve the productivity and quality of markdown decisions.

MarkdownXpert builds on AIS' expertise in scalable algorithm development, pattern recognition, neural network and other artificial intelligence capabilities to address retailers' need to "learn from" and automate best practice pricing processes to increase sales and margins. The solution utilizes technologies to predict optimal markdown pricing strategies earlier in an item's life.

Existing markdown optimization solutions may require performance data on a longer timescale, problematic for fashion items and new items. As a result, existing software often uses summary or category data for performance modeling. Since few items' selling curves match the category model, the resulting markdown recommendations are not as useful, AIS asserts.

Because MarkdownXpert can use the performance of the item itself, AIS said that the solution allows for more accurate markdown recommendations.

"In the real world, retailers rarely blindly accept markdown recommendations simply because they are 'scientific,'" said AIS CEO Jim Dixon. "Retailers use the scientific recommendations as a starting point in making final markdown decisions. Brand strategy, item and location attributes, budgets and retailer-specific best practices all come into play. MarkdownXpert automatically learns and optimizes each retailer's decision-making best practices to ultimately produce the best possible results for the organization."

MarkdownXpert "learns" from each retailer's best practices over time to make recommendations that reflect the way goods are most effectively marked down. Users can review the recommended markdowns and then make appropriate adjustments as they see fit.

Key product features include the ability to make pricing recommendations early in the season using each item's own performance rather than summary data and analyze each markdown scenario in context, helping the user to make the most effective markdown decisions.

The solution also can recommend temporary price reductions that can assist retailers by avoiding permanent price reductions on items with future planned promotions, minimize in-store handling costs associated with redlining or re-ticketing merchandise, and help optimize markdowns against constrained markdown budgets.

Automated assistance can help the user to see the data in the most relevant way, and the solution can help in determining how to optimize markdowns against budget to maximize revenue dollars and margins across the business.

Further, MarkdownXpert offers the ability to review usage and effectiveness of a retailer's pricing decisions through reporting of performance metrics. This ability can help a retailer to measure their pricing effectiveness to identify best practices that ultimately lead to improved financial performance.

Performance management data from MarkdownXpert can be shared with AIS' flagship product, AllocationXpert, an allocation optimization solution designed to learn and replicate the best-practice decisions of a retailer's leading allocators, and can also be shared across the organization to optimize other merchandising processes.

Additional Articles of Interest

— The focus in the retail sector has shifted from managing the movement of goods to managing information about goods. Read more in "Ramping Up the Retail Supply Chain," in the February/March 2005 issue of Supply & Demand Chain Executive.

— Leading crafts company Creativity Inc. has found that, with a bit of trust and a lot of teamwork, a little consulting can go a long way in addressing supply chain pain points. Read more in "Crafting Success in Supply Chain Transformation," cover story in the December 2005/January 2006 issue of Supply & Demand Chain Executive.