This is interesting.  I guess I hadn’t given that much thought to pricing before.  But with the ability of people to price shop in ways that haven’t been done before, businesses are having to become a lot smarter about their pricing strategies.

“Most retail companies still do a lot of things manually,” says Steven Schwartz, senior vice president of planning and allocation at the Casual Male Retail Group, a chain of 475 clothing stores. “Our buyers and planners got reports on sales and inventory weekly,” says Schwartz. “And they evaluated those reports, looking for what was selling, what to discount, and deciding the markdown. But they were going through paper 12 inches thick. We took a markdown. If it worked, great. If it didn’t work, we took another markdown.”

A couple of years ago, Schwartz began to look for a better way, and he found a half-dozen companies offering software to automate the markdown process. It works somewhat like airline-pricing software: The computers absorb several years’ worth of data, look at what’s in stores and how it’s selling, and spit out recommendations for prices on specific clothing items. Casual Male picked ProfitLogic, a company based in Cambridge, Massachusetts that is also working with the Home Depot, JC Penney, and Old Navy. During the first year, Casual Male did a test across six departments in all of its stores. Schwartz’s buyers would tell the ProfitLogic software what inventory they wanted to move, what the price was, and, most importantly, when Casual Male wanted to be sold-out ( or when the chain wanted to have a certain amount left to be sold at its outlet chain ).

ProfitLogic’s system not only gave guidance on what to discount, and by how much, it also allowed Casual Male’s buyers to ask their own questions, like, “What happens if we mark down 10% instead of 20%?”

The software inspired one basic change in the Casual Male markdown world: Discount less, but discount a lot sooner. “Merchants tend to get emotionally committed to what they buy,” says David Boyce, ProfitLogic’s vice president of marketing. “Buyers pick styles, colors. In general, they get it right, but once in a while, they don’t. They always say, ‘Just one more week! It will sell!’ ”

At Casual Male, the results were immediate. “Sell throughs”—selling all of something—“were much faster, much sooner,” says Schwartz. The clothing was still on sale—but not as deeply discounted as it would have been a month later in the season. Schwartz is protective about the exact improvement in profitability. But in June 2002, the software was rolled out for all items at all stores—after Casual Male upgraded its national point-of-sale system.

Maybe this is why I could never find the pants I wanted in stock at any of their local stores (or even on their website at times).  Of maybe I was just using the most popular size at the time*.  The situation seems to have improved recently, though.

Link via Slashdot.

* Yep, Casual Male is a “big and tall” outfit.  But since I’ve been doing the Atkins Plan since September, I may be able to kiss them goodbye at some point this year.  I’ve still got a ways to go before I finish, but the results so far are promising.