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Galeria Karstadt Kaufhof automates discounts through new software

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Galeria Karstadt Kaufhof is using software to automate markdowns on its fashion products.

The platform from JDA and Blue Yonder can automatically determine the optimal price for a product at every stage of the lifecycle.

It draws on information such as day, store, product, colour and size, identifying weak sellers and automatically adjusts their prices. Assortment managers can view the performance through reports.

The retailer has been using the software since April 2018 in Karstadt department stores but will now expand it to Karstadt Sports and Kaufhof stores.

Galeria Karstadt Kaufhof was created through the merger of Karstadt Warenhaus and Galeria Kaufhof. Automation is one way that the newly combined entity is managing the increased sales volume.

Our view: Discounting to sell less demanded stock is an important tool for retailers, especially in the trend-driven world of fashion.

However, there are clear risks, not just in the directly negative impact on profitability per customer despite increased sales. Routinely discounting can implicitly devalue the retailer’s products, with customers deciding to wait for items to be discounted rather than paying full price.

Another way of dealing with off-season stock is offering the discount as part of a membership programme. German fast fashion giant Zalando deals with discounts by providing exclusive access to a selection of products for a limited time with discounts of up to 75%. It has 15 million members.

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