Make Your Markdowns Matter

By Erin Harris

The economy has created a need for retail markdowns, as price adjustments are made to spur the sale of goods. But, the markdown process can be extremely costly to your business if not managed correctly. I recently had a Q&A session with Rick Wescott, VP of sales at SATO Labeling Solutions on the importance of properly-executed markdowns. Here's what he had to say on the importance of label type to the markdown process, the benefits of effective markdowns, and more. For more information about SATO Labeling Solutions, visit www.satolabeling.com.

1. What are retailers doing correctly and incorrectly when creating markdowns?
According to our research, one in five retailers has an effective markdown process. These retailers are selling more targeted markdown merchandise quickly by making their markdown merchandise readily identifiable to the consumer. Typically, retailers use signs and brightly colored labels on the products, on the original price label, or on the hang tags, as these labels attract the customer's attention. The labels also have security slits so a label cannot be lifted off one item and be placed on another, as label switching is a component of shrink for the retailer. The markdown price is clearly identified, and the prior price is listed. The price includes either a dollar savings or percentage off so the customer is aware of the deal they are getting. The deal creates the impulse to buy as a savings. The greater the percentage off, the more likely a customer will buy the item. The correct markdown price is always charged at the POS.

Most retailers use colored pens and plain small labels to do markdowns. Neither of these solutions attracts a customer's attention. In the case of a handwritten markdown label, the price may be illegible, prompting queries to sales associate. If the customer does not receive an answer on the price quickly, they will probably put the item back on the shelf. In the handwritten markdown practice, multiple markdowns are shown, making it difficult to determine which price is the right one. The entire tag may become hard to read. Multiple markdowns usually render the markdown process ineffective. Pens can soil an apparel item with ink, making an item even more difficult to sell. Also, could a customer with his own ink pen write a price and create his own markdown?

Small plain white labels are somewhat more effective than pen markdowns in attracting a customer's attention to a markdown item. Typically there is only a price on the label, creating questions for the customer. While it is more legible to read than a handwritten markdown label, how does the shopper relate to the deal? What is the old price? How much will I save? The use of multiple markdown labels tends to block information on the original label or tag. The shopper may want to see that information. But, can they?

2. How can retailers benefit from properly executed markdowns?
Retailers using an effective markdown system, which includes using bright, attention-getting labels, will sell merchandise more quickly and reduce the time spent in store on the original markdown process. Also, an effective markdown system reduces the need and the time associated with multiple markdowns. Selling more markdown merchandise quickly reduces inventories, allowing higher-margin, fast-selling, or in-season items into stores more quickly.

3. How easy is it for retailers to transition to a new markdown process?
Transitioning to a new markdown process depends on the sophistication level of the solution the retailer chooses. If a retailer uses a handwritten pen process, transitioning to a hand-labeling tool with labels is easy transition. As it applies to color, size, and price presentation, a carefully-constructed label design can provide many benefits over the handwritten process. A mobile self-contained printer system would require some initial printer set up and testing, but it is still relatively easy and offers great labor savings in the long run. Wireless handheld computers and portable printers would be more difficult due to the system integration and increased hardware and software costs. The benefits of a fully-automated system are greater than the nonintegrated self-contained printer and the hand-labeling markdown processes.

4. Why is label type so important when selling markdown merchandise?
It is important that the label is made with permanent adhesive so that someone cannot switch labels easily. Combining the permanent adhesive with security slits makes tampering with labels evident. There's a recent trend whereby retailers place a wash away label type on some hard goods. While this type of label has permanent adhesive to prevent label switching, it is easily removed at home with the use of warm water. For one of our customers, we sourced an aggressive removable adhesive to help prevent label switching. This kept the consumers happy, as the label removed without a great deal of adhesive residue.

5. Customers using self-checkouts may encounter errors if markdown prices are not clearly labeled, or if the scanner cannot read the markdown. How can such markdown errors be avoided at self-checkout?
Problems at self-checkouts occur when a new bar code is created for the markdown label. A dirty print head on a bar code printer may produce a poor bar code that is not read easily, causing a problem at a self-checkout. Shoppers are not trained in scanning systems, and they are not quick to orient product bar codes in several directions to attempt to scan. In some cases, a markdown label may contain a new bar code that should be used in place of the original UPC (universal product code) bar code. If the original bar code is not covered, the self-checkout shopper may scan the original UPC bar code and the POS system will retrieve the original non-marked down price. The capture of the original price necessitates assistance from someone in the store to authorize the markdown. A good markdown label with a newly-created bar code should include a perforation. This directs the shopper's attention to the front of the product while the new bar code covers the original bar code, which is usually on the bottom of the product.

6. What is the MB200i markdown bar code solution? What is its form factor?
SATO Labeling Solutions' MB200i solution is part of an online markdown solution. The MB200i direct thermal 2-inch portable printer is blue tooth or WLAN capable. When paired with an in-store handheld computer scanner, WLAN is the most efficient and cost-effective markdown system. Its light weight makes it easy for an operator to carry it on a belt. The MB200i printer is built in linerless capability, allowing it to be used with linerless labels.

SOURCE: Innovative Retail Technologies