A model for determining price markdowns of seasonal merchandise

Abstract

Retailers of seasonal merchandise often face the problem of selling a fixed inventory over a short selling season. For a small retailer, with a sunk investment in inventory, a major objective is revenue maximisation. This paper is concerned with the provision of decision support for the tactical problem of dynamically marking down the price of seasonal merchandise in order to increase/maintain revenue. A heuristic procedure is developed for quickly identifying, and highlighting for review, items which are “slow selling” and “economically viable for price markdown”. It is shown how a retailer can use such information in determining the timing and magnitude of price markdowns.