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A Method and Apparatus for Markdown Life-Cycle Timing Prediction

IP.com Disclosure Number: IPCOM000238857D
Publication Date: 2014-Sep-22
Document File: 8 page(s) / 176K

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This invention provides a method to analyze, evaluate and auto-suggest the most effective markdown timing segments for short-lifecycle products. 1. Automatically analyze and evaluate the correlate influencing regularities of product lifecycle and price on profit and inventory 2. Automatically suggest the most effective markdown timing segments based on timing & price elasticities 3. Aggregate and recursively refine the markdown timing segments during the markdown execution with real transaction data..

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A Method and Apparatus for Markdown Life

A Method and Apparatus for Markdown Life-

Markdown is an important merchandising activity in products sales especially for the short-life-cycle products. It can help retailers to dramatically reduce and cleanup the inventory in a short given sales period. But in today's markdown, retailers need to set up the markdown date range including start date and end date manually based on their experiences, which is not very accurate and efficient. Besides, it is a little difficult for retailers to make the right strategy and proper price in markdown to get the possible maximum profits while liquidating inventory quickly.

To solve the problems mentioned above, this invention provides a method and apparatus that can prompt retailers when is the best time to implement markdown. Also it can help retailers to set the most advisable markdown price to maximize total gross margin dollars over the entire product lifecycle.

The core idea of this invention is to facilitate retailers to figure out the most reasonable time point to start markdown, along with the most proper price, through

which retailers can lower down the inventory to expected level, and maximum profit.

Advantage of this invention:

Calculate the Timing Elasticity (TE) and Price Elasticity (PE) factor together: Timing Elasticity (TE) is effective coefficient of timing to volume, and Price Elasticity is effective coefficient of price to volume. These 2 factors are working together to determine the actual sales volume.

Regression Analysis: Based on historical data to figure out the Timing Elasticity (TE) and Price Elasticity (PE), which can be used to find the most proper markdown start date and price, to get higher profit and to reduce inventory as expected.

1). Calculate the Timing Elasticity (TE) and Price Elasticity (PE) factor for each product

Timing Elasticity (TE) is the key factor to decide the most proper starting date of markdown. It's the sensitive coefficient of volume to timing, representing how the volume changes at the same markdown price but at different time point of product's life cycle. Under the same price, the sales volume gets lower and lower with the timing getting closer to the end date of product's life cycle.

Timing Elasticity is calculated based on regression analysis of historical data. In this process, should also consider the effect of markdown price, or in another

word, discount.

Price Elasticity (PE) is another key factor to decide the most proper discount price to process markdown. It represents at the same time point of product's life cycle, how the sales volume varies according to the adjustment of price.

These 2 factors work together to affect the sales volume and profit. It's necessary to calculate them together. The steps are as below:

a. Life-Cycle segmentation
At the first, need to divide the product's sale life cycle to many equalized atomic slots, in common sense, these are weeks.

Thus, these time...