Question

• What factors need to be considered to determine markdowns?
• What issues could possibly arise if a partnering store doesn’t sell through the collaboration product or is not selling through the product as well as expected?
• Who should dictate when markdowns are taken, the parent company or the partnership retailer?

Answer 1

Factors to be considered to determine markdown are :-

i)Timing of the markdown- Markdown shoud occur after the item has been in the store for a certai period of time. This helps in keeping the sales volume sufficient to keep the inventory stable.

ii)Managing inventory - The more stockyou have of an item , more it is likely to be marked down at some point.There is a relation between inventory turnover and markdown. More the turnover less will be the markdown and vice-versa.

iii) Dating purchases- Dating is when the vendor gives you extra time to pay for the merchandise after it is delivered . If the vendor gives you more time to pay ,yoyu may be able to ell it before the payment is due and hence less chances of markdowns.

The issues if the partnering store is not selling as well as expected are :-

i)low profits as the product is not well sold.

ii) customer may perceive the product as not as good as it looks

iii) competitos may take advantage of it and acquire better market position

The markdown are dictated by the partnership retailer as it has to decide whether or not t bring the pricedown in order to increase sales or clear inventory.