Business Overview
A United Kingdom-based men’s and women’s online underwear and swimwear retailer, with £15+ million in annual revenues. Lingerie currently contributes towards more than 50% of sales, but swimwear is soon expected to become the dominant product line.
The Challenge
There was a heavy reliance on discounting to ensure fashion lines sold out.
Pricing decisions were being made predominantly on market knowledge and gut feel, rather than being data driven.
There was a desire to maximise the margin of products during the full-price stage of the product life-cycle.
There was a desire to reduce the heavy drops in price at each mark-down stage.
There was a need to identify whether there was a potential for dynamic pricing within a fashion focused business.
29% improvement in net sales margin
43% Improvement in net sales
The Solution
The BlackCurve Price Optimisation Platform was selected to address their challenges.
Custom rules were configured that initially matched the pricing decisions done manually; however, now the rules were implemented automatically, rather than on an ad hoc basis.
After an initial assessment period, BlackCurve’s Data Science Team identified that the minimum margin requirements should be reduced by a further 9%, and the benefits from increased sales volume would far outweigh the margin hit on an individual product sale.
The Results
It was identified that the products sold by this online retailer were price elastic and therefore ripe for price optimisation, i.e. movements in price up or down changed buying behaviour.
By lowering the minimum margin requirements during the full-price stage, a massive increase in the volume of products sold was witnessed.
Products were held at the full-price stage for much longer, meaning a higher overall average margin throughout the entire product lifecycle (including markdown and clearance stages).
BlackCurve outperformed the control group being managed by the company’s merchandiser who commissioned the BlackCurve project:
29% improvement in Net Sales Margin
43% improvement in Net Sales