Retail pricing and the costs of clearance sales

Praag, Bernard Van; Bode, Ben

doi:10.1016/0014-2921(92)90067-7

Cited by 15 publications

(4 citation statements)

References 5 publications

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“…Giulietti and Waterson (1997) offer a multi-product retail pricing model similar to Bliss (1988) which admits the possibility of loss-leaders, but use this model to explain only continuous price variation and not periodic sales. Epstein (1988), on the other hand, develops a multi-product version of van Praag and Bode (1992) in which he maintains the dominant rationale for sales among fashion goods is the ability of sales among some goods to increase demand for others. Without relying as explicitly on potential complementarity, McAfee (1985) presents a multi-product version of Burdett and Judd's (1983) price dispersion model.…”

Section: Rationale For Price Promotionmentioning

confidence: 99%

Sales by multi-product retailers

Richards

2006

Manage. Decis. Econ.

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This paper examines the rationale underlying periodic price promotions, or sales, for perishable food products by supermarket retailers. Whereas previous studies explain sales in a single-product context as arising from informational, storage cost, or demand heterogeneity, this study focuses on the central role of retailers as multi-product sellers of complementary goods. By offering a larger number of discounted products within a particular category, retailers are able to attract a sufficient number of customers to offset the effect of lower margins on sale items by selling more high-margin items. The implications that emerge from the resulting mixed-strategy equilibrium are tested in a product-level, retail-scanner data set of fresh fruit sales. Hypotheses regarding the rationale and effectiveness of sales are tested by estimating econometric models that describe (1) the number of sales items per store, (2) the depth of a given sale, and (3) promotion effectiveness on store-level demand. The results of this econometric analysis support the hypothesis that the breadth and depth of price promotions are complementary marketing tools, thus explaining how EDLP and HI-LO store formats can exist in the same monopolistically competitive market equilibrium. Copyright © 2006 John Wiley & Sons, Ltd.

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Section: Rationale For Price Promotionmentioning

confidence: 99%

Sales by multi-product retailers

Richards

2006

Manage. Decis. Econ.

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“…, J n } in period n. These include -monetary loss due to anticipated damage and shrinkage in period n ‫ס‬ GQH a,n (d ‫ם‬ u)C; -inventory holding cost incurred in period n ‫ס‬ Max((I a,,n ‫מ‬ D nj ), 0) hW n ; -inventory stockout cost incurred in period n ‫ס‬ Max((D nj ‫מ‬ I a,,n ), 0) kW n ; -cost of a markdown action ‫ס‬ Ax n W n‫מ‬ 1 , where A denotes the fixed cost incurred every time a markdown is taken, for example, the costs of in-store display rearrangements, putting up sale signs, and so forth, while x n ‫ס‬ 1 when P nj Ͻ P n‫1מ‬ and x n ‫ס‬ 0 when P nj Ն P n‫1מ‬ . Such markdown implementation costs can become quite significant when a large number of stores in a retail chain are involved [Robins 1993] and can possibly influence their number, timing, and magnitudes [Van Praag and Bode 1992]. The discount factor W here is subscripted by n ‫מ‬ 1 assuming that markdown costs are incurred just before the period in which they are applied.…”

Section: Inventory Movementmentioning

confidence: 99%

A Decision-Support System that Helps Retailers Decide Order Quantities and Markdowns for Fashion Goods

Mantrala¹,

Rao²

2001

Interfaces

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We developed MARK, a stochastic dynamic-programming model-based decision-support system, specifically to help retail-store buyers of fashion goods decide on optimal merchandise order quantities and markdown prices. We implemented MARK as an interactive software program that runs on users' personal computers and can be integrated with the retailers' point-of-sale (POS) and other information systems. As we show in an actual-case illustration, MARK improved profitability and managers' understanding of the decision problems. MARK also provides valuable insights into the interplay between order-quantity and dynamic-pricing decisions. For example, higher markdown percentages do not necessarily mean lower profits.

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“…High-low pricing and the``sales'' The economics literature has offered both econometric models and empirical studies which address possible causes of, or motives for, holding``sales''. The motives include intertemporal price discrimination to skim the consumer surplus (van Praag and Bode, 1992), clearance, fashion life cycles and pricing uncertainty (Lazear, 1986;Pashigian, 1988), generating price confusion (Varian, 1980) and peak load pricing (Pashigian and Bowen, 1992).…”

Section: Introductionmentioning

confidence: 99%

High‐low pricing: audit evidence and consumer preferences

McGoldrick

Betts

Keeling

2000

Journal of Product &Amp; Brand Management

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In spite of their importance within pricing strategies, “seasonal sales” have received little attention within the literature. The recent interest in “high‐low” pricing has, however, increased the attention given to temporal shifts in store‐wide, rather than item level, prices. Following a brief review, this paper draws upon two case studies of leading retailers of apparel in the UK. Evidence is also presented from audits of pricing and markdown activities over a three‐year period, illustrating some contrasts between stated strategies and actual pricing activities. A cost‐benefit analysis of high‐low pricing requires knowledge of consumer preferences and attitudes. Results are drawn from a study of over 2,600 “sale” shoppers, indicating stated preferences for markdown frequency, depth and coverage. In general “sale” shoppers appear to prefer a variety of markdown levels, increasing their scope to succeed as bargain hunters.

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Retail pricing and the costs of clearance sales

Cited by 15 publications

References 5 publications

Sales by multi-product retailers

Sales by multi-product retailers

A Decision-Support System that Helps Retailers Decide Order Quantities and Markdowns for Fashion Goods

High‐low pricing: audit evidence and consumer preferences

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