The Art of Minimizing Retail Markdowns

MakersValley Blog | The Art of Minimizing Markdowns
Chanoa Tarle

Chanoa Tarle

The reasons to minimize retail markdowns abound - from protecting profits to improving the longevity of your brand. Then there’s the COVID-19 element. Many of you are faced with the challenge of deciding how to offload excess inventory while products remain relevant. While your instinct may be major discounts, try to avoid the sales frenzy; explore these short-term and long-term avenues instead.

Avoid apparel markdowns

Improve Your Sell-Through Rates

If you sell direct-to-consumer, use your sales history, predictive sales trends, and other data to understand how, if, or when to limit production for certain categories or SKUs. Speak to your suppliers and manufacturers. Can you produce small batch orders? If you start producing smaller orders but experience a sharp increase in orders, will your partners be able to accommodate those changes? These types of arrangements often promise expensive contracts, however, some manufacturers give you the ability to scale up production if this happens. This is something you should discuss with them at the outset of your relationship, particularly in this age of COVID-19

Be frank about your needs and listen to your partners’ unique needs. They may want to help but they also have certain limitations to respect in order to stay in business. Flexibility and support is possible, however, try not to set unreasonable expectations. For example, an industrial production factory may have more leeway than an artisanal, family-owned facility in a hard-hit region, and a network of factories will grant you more flexibility than a solo manufacturing operation.

For wholesale deals, speak with your retailers. What are they planning for the upcoming seasons based on everything that is happening? How will their buys be affected? Finally, gage your best wholesale partners' interest in buying more of your bestsellers or recent top-performing merchandise. Your merchandise with the lowest risk should be at the forefront of your pitches to wholesalers in this time.

Host Limited-Edition Sales Events

There’s value in scarcity. Shoppers can get excited about limited-edition products, limited-edition collections and limited-production collaboration merchandise because they’re attractive, they come from their favorite brands, and they have to act soon or risk missing them entirely. What limited-edition products can you offer right now based on your manufacturing partners’ current capabilities? Customers may be spending less on non-essential items in the wake of the coronavirus, but they haven’t stopped shopping altogether. 

What can you offer that would be appropriate and relevant at this time? What tools can you use to market the sale of these products in a way that incorporates community, engagement, and fun? Depending on your target market, your list can begin with tools like Instagram Stories, Instagram Live, or Twitch.

Properly-executed limited-edition collections help you achieve healthy sell-through rates while avoiding excess inventory. When they’re done right, they can grow sales, increase visibility, and build buzz.

High-end green satin bow

Scan the Market

Use whatever leverage you can to safeguard your brand. Create contractual provisions (whenever possible) barring wholesale partners from selling your goods to third parties to offload excess inventory. The more consumers see your products at off-price retailers outside of your own channels or those of your valued retailer partners, the more tarnished your brand will be in their eyes. 

However, it’s important to note that this can be very difficult to secure when it comes to deals with larger retailers. They often contractually ensure they have the power to do whatever they wish with your merchandise after payments have been made. Still, there are many who will listen to your concerns and work with you when they can. 

Regardless of your agreements with wholesale partners, do what you can to control your distribution. Scan the market regularly so you’ll always know if your goods are ending up in off-price retailers not associated with your clients or unauthorized retailers. Armed with this information, you’ll be able to make some corrective actions accordingly. The longevity of your brand depends on it.

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