Retailers Rely Less on Wind Sock Direction for Merchandise Markdowns

Thanks to e-commerce, some retailers' bottom lines improved by as much as 10% this year. One e-commerce vendor from Cincinnati, Ohio, Spotlight Solutions, licenses software programs that analyze and compare a particular retailer's sales data from the retailer's current sales season to sales from several previous years. The software then recommends markdowns of specific goods at specific, discounted prices by designated store locations, and sends the information via the Internet to the retail store's merchandizing managers. Additionally, the software also makes recommendations as to the optimum time for the merchandise to be marked down. Retailer Saks Fifth Avenue began using Spotlight Solutions analysis and has seen significant improvement in its overall bottom line as a result. The system operates on the assumption that markdowns will be offered at staggered times at various stores. This "crystal ball" technology does not come cheaply: technology companies working with large retailers have reportedly received fees from $1 million to $5 million, depending on the size of the retailer, for the set up, configuration and software license fees associated with the e-commerce programs.