Price Optimization Helps Goody's Maximize Margins

By automating its markdown pricing, Goody's Family Clothing is able to set the optimal markdown schedules and prices for a greater volume of its merchandise.

Goody's Family Clothing, headquartered in Knoxville, TN, sells moderately priced fashion apparel at 385 stores in 21 states, mainly in the Southeast and Midwest. It stocks national brands such as Dockers, Levi's, Nike, and Reebok in addition to its own labels, Goodclothes and Duck Head. The retailer has long relied on a marketing strategy that includes competitive pricing, a broad inventory, and frequent promotions.

Goody's typically carries 150,000 items at any given time. Each item has an expected life span, based on a projected demand curve, and at the end of its life span, in an ideal world, each would be entirely sold out. Goody's employs a team of merchants who manage the pricing of all of its products over their life spans, including determining when to take markdowns on each product and how much to mark them down. Traditionally, the merchants used detailed historical sales reports and projections, along with their own knowledge, experience, and gut feelings, to decide when and how much to mark items down. However, with so many products to manage, it was impossible to stay on top of each one and implement timely markdown strategies for each. As a result, Goody's was finding that it was left with too much inventory at the end of the season or selling period, because it did not mark down prices soon enough. At the same time, the retailer wanted to avoid marking down prices too soon or by too much, as doing so led to stores being sold out of products too soon, as well as eroding margins.