Hold your nerve: why this autumn’s markdowns need more than a spreadsheet to be successful

It is 24 degrees in late September. The shop windows are full of wool coats, the shoppers walking past are in T-shirts, and a few doors down the first sale signs are already up. In a first look at markdown activity this September, our team at Markmi, which builds an AI-enabled markdown management assistant for fashion retailers, noticed a lot of early markdowns. What is the story here?

When we reached out to seasoned merchandisers in the UK, Gavin Abery, founder of HIF Group, a commercial strategy consultancy, whose career runs from the Next shop floor to Levi’s Dockers and Original Penguin, had seen the same. After his own markdown sweep in mid-September, he was “quite surprised to see the number of businesses in fairly significant markdown”.

For some retailers, the warm summer “has been a real boon”, says Abery. They could reorder their best-selling styles, as a few heatwaves set off moments of panic buying, when people, as he puts it, “just need shorts”. Whether such a product is priced at ten pounds or fifty, shoppers simply grab what solves the problem. Some retailers sold out of certain items and were left in a difficult position. Others sold related products they would never have sold otherwise. Either way, “that’s hidden an awful lot of signals” about what was really working.

Now autumn has to launch, and for many retailers that looks difficult. The exception, Abery says, is a brand that sits at the centre of culture. Take Calvin Klein: after a Netflix documentary on the Kennedys, its nineties-style jeans had “an incredible run”. Without that kind of cultural pull, he sees “a challenging start for many retailers”. This season, retailers may find themselves caught between two forces: cash pressure that may push them to mark down fast and deep, and the patience needed not to mark down too early. How they handle that tension could well shape their margin for the year.

Two forces pulling in opposite directions

The first force is cash. Long lead times mean that “by the time you sell your first item in that particular range, you’ve probably paid the invoice for that range, or at least something towards it”, Abery says. “That cash flow element is really, really tricky, and that is the thing everyone’s battling with.”

It shows in how deep retailers are now willing to go. Asked whether markdowns have become more aggressive, he answers: “Yeah, definitely, definitely.” He sees “more of a let’s get through it now” approach, driven partly by investors focused on cash conversion.

The second force is patience. “I would say you want to hold your nerve for as long as possible,” Abery says. If core new-season products already need a markdown, “you’ve pretty much condemned your season”, because “you’re telling the customer that you are in some kind of distress”.

For the UK, he would not expect “any big decisions around promotion until you have that first cold snap”. With coats on the floor, “you can’t judge them when it’s 24 degrees outside, unless you are a super hot brand”.

Clear the failures early, give the core time to sell

The two forces do not have to collide. One way to reconcile them is to separate what has clearly failed from what simply has not had its moment yet. Zara, Abery notes, takes price action on fashion failures “earlier rather than later”, and because of that, “you don’t train the customer to wait for sale”. The core range can then wait for a real signal, and for the peak that still decides the year. He sees retailers using Black Friday and Prime Day to clear what has not worked, while putting their weight behind the winners for December.

Why spreadsheets no longer keep up with the season

Doing that well means many decisions at once. Abery describes teams asking which stores a product should still go to, whether it sells better online than in store, and what to do if the month comes in up or down, all while waiting for weather nobody can predict. Many teams still make those decisions in spreadsheets. “Retail has been typically slow to adopt new systems,” Abery says.

For Laurent Mainil, CEO of Markmi, spreadsheets are no longer an adequate option. “People talk about the old seasons as if the spreadsheet once coped. It barely did. And those seasons are gone. The same product now sells in stores, online and on marketplaces at once. Søren Juul at Zizzi, a client we work with, put it well: the human mind can’t keep track of the fact that discounting the blue item also moves the black one, and dozens of those interactions happen at once. No workbook keeps up with that.”

What makes a team trust the numbers

Abery expects the mechanical work of markdown planning to be automated. What remains is judgement. Merchandisers will need to be “on the loop”: “They are looking at outputs, making decisions and feeding back into the AI.”

That may only work if teams trust what a tool tells them. “A merchandiser lives or dies by the numbers he or she provides in the meeting,” Abery says. A wrong figure in a big meeting is, in his words, “death to a merchandiser”. The answer is not blind faith: “You can show the workings, you can show the reasoning.”

About Markmi, and where to meet us in London

Markmi is the markdown management assistant for fashion retailers, delivering up to 7 per cent more margin and 80 to 95 per cent less time spent on markdowns. Markmi will be in London at RE:PLAN on 13 and 14 October and at TheIndustry.fashion on 15 October, to meet UK merchandising and commercial teams facing exactly these decisions.