Markdown optimization for an apparel retailer under cross-price and initial inventory effects

Coşgun, Özlem; Kula, Ufuk; Kahraman, Cengiz

doi:10.1016/j.knosys.2017.01.003

Cited by 13 publications

(7 citation statements)

References 20 publications

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“…is is because of the decrease in fashion deterioration rate benefits from the design that enhances fashion. When it is reduced to a certain extent, the cost of the effort to enhance the design rises rapidly, and the retailer shares part of the 8 Complexity design cost through the order volume, thus offsetting part of the sales revenue. erefore, investment in fashion design needs to be within a certain range.…”

Section: Impact Of the Deterioration Rate (η)mentioning

confidence: 99%

“…Cachon and Feldman [7] found that frequent discounts can attract more consumers considering the consumer buying behavior, and the discount strategy is often more effective than the fixed price strategy. Cosgun et al [8] considered the multitype clothing price reduction optimization problem of the retailer and used approximate dynamic programming algorithms to study the price reduction strategy of each product. Aviv et al [9] studied that the seller who sells seasonal fashion goods can adopt dynamic pricing and quick inventory replenishment during the sales season to enable consumers to purchase fashion products at a higher price in advance.…”

Section: Introductionmentioning

confidence: 99%

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Optimal Pricing Decision of Fashion Apparel considering Experiential Service and Design Enhancement

Zhou

Chen

2020

Complexity

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Fashionable clothing is susceptible to seasonality, fashion popularity, and other factors. The decline in the fashion level for fashion apparel will cause its market value to continuously decrease, reducing market demand and creating a backlog of apparel inventory. Under such a circumstance, the apparel retailer chooses to maintain the fashion of the goods by providing experiential services or enhancing product design capabilities. This paper focuses on the discussions on the issue of whether experience service and design efforts are complements or substitutes. The major objective is to simultaneously determine the experience service investment and the optimal selling price to maximize the total profit. First, a Cobb–Douglas utility function is used to derive a demand function that depends on the price and fashion level. Four kinds of inventory models are further established to obtain optimal pricing and inventory ordering strategies. Second, an algorithm is presented to search for the optimal solutions of the proposed model. Finally, a numerical example is provided to perform a sensitivity analysis of the key parameters and to discuss specific managerial insights. The numerical examples show that both the experiential services and the enhanced fashion design can effectively reduce the apparel company’s inventory and increase profits. When the two strategies are combined, they will produce complementary or substitution effects, which depend on the deterioration rate of the fashion level of the apparel. If the deterioration rate is less than a critical value, the interaction of experiential services and design investment has a complementarity effect.

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Section: Impact Of the Deterioration Rate (η)mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Optimal Pricing Decision of Fashion Apparel considering Experiential Service and Design Enhancement

Zhou

Chen

2020

Complexity

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“…Cosgun et al [20] addressed the simultaneous determination of markdown prices and optimal initial inventory levels under the cross-price effects in a random demand setting for multiproduct groups. All of these studies proposed using quick response strategies to deal with volatile market demand by reducing order lead time to more accurately determine the appropriate quantity to order.…”

Section: Mathematical Problems In Engineeringmentioning

confidence: 99%

Joint Pricing and Inventory Control Decisions for Fashion Apparel with Considering Fashion Level and Partial Backlogging

Zhou

Chen

2021

Mathematical Problems in Engineering

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Apparel inventories have been crawling up for decades. The fashion level of clothing drops over time, resulting in a continuous decline in market value, a rapid reduction in demand, and unsold inventory. Poor inventory management weighs down the apparel industry. Inventory planning decisions are crucial for a fashion apparel retailer. When the good is highly perishable, the retailer may need to backlog demand in order to market the good at a reasonable price and reduce inventory costs. This study formulates a finite horizon inventory model for fashion apparel under deteriorating fashion level and partial backlogging conditions. This model jointly optimizes the selling price, length of inventory-holding period, and length of shortage period by maximizing the average profit. The conditions that characterize the optimal solution are established and an algorithm is proposed to search for the optimal solutions. A numerical example is provided to illustrate the algorithm and the solution procedure. Furthermore, sensitivity analysis of the key system parameters is carried out and some interesting managerial insights are presented. Findings clearly suggest that the presence of shortage has got an affirmative effect on ordering policy of the fashion apparel retailer.

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“…Shah et al [39] developed the markdown option model for a two-level Stackelberg game model. A markdown optimization model for more than one product and considering a cross-price effect between many products was investigated by Cosgun et al [10]. Nagare and Dutta [26] developed markdowns for single-period inventory models in two market scenarios with price-sensitive segments and price insensitive segments.…”

Section: Introductionmentioning

confidence: 99%

Revenue and risk sharing in view of uncertain demand during the pandemics

et al. 2022

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Due to stochastic demand during the pandemics and uncertain environment, the vendor and the retailer share their risks and benefits by applying revenue sharing and markdown policy in order to reduce the risks and achieve a win-win contract. Three supply chain coordination policies, decentralized policy, centralized vendor-retailer policy and centralized vendor-retailer revenue sharing policy are developed. An example with uniform probability demand is used to illustrate the model. The result shows that the revenue sharing contract is more attractive for the retailer, and the centralized policy is more attractive for the vendor. Therefore, price markdowns are used to share benefits. The sensitivity analysis shows that the number of markdowns is not sensitive to the variances in the uniform demand distribution. A win-win contract based on a revenue sharing and price markdown is developed. A case example shows that the mechanism of price markdowns and revenue sharing contract affect the optimal supply chain profit in view of the pandemics and uncertain environment.

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Markdown optimization for an apparel retailer under cross-price and initial inventory effects

Cited by 13 publications

References 20 publications

Optimal Pricing Decision of Fashion Apparel considering Experiential Service and Design Enhancement

Optimal Pricing Decision of Fashion Apparel considering Experiential Service and Design Enhancement

Joint Pricing and Inventory Control Decisions for Fashion Apparel with Considering Fashion Level and Partial Backlogging

Revenue and risk sharing in view of uncertain demand during the pandemics

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