1. A DemAnDTeC CusTomer suCCess sTory
Real-time markdown technology
results in 7 percent gross margin
improvements
CusTomer overview Gordmans features a wide range of merchandise including apparel, accessories, footwear,
home fashions, gifts, designer fragrances, fashion jewelry, bedding and bath, accent
Gordmans is an exciting, fun-to-
furniture, and toys. Headquartered in Omaha, Nebraska, the privately held company
shop store that offers savings of up
operates 65 off-price department stores throughout the Midwest with 4,000 associates and
to 60 percent off department and
annual revenues in excess of $400 million.
specialty store prices. Headquartered
in Omaha, Nebraska, Gordmans Over the past four years, Gordmans has aggressively expanded, opening 24 stores
operates 65 retail stores in 16 and posting year-over-year average sales growth of 10 percent. In turn, that double-
states featuring a broad selection digit growth generated expansion of the existing technology infrastructure, including an
of name-brand clothes for all updated distribution center management system, new POS hardware and software, a
ages, accessories, footwear, gifts, state-of-the-art information support exception query and drill-down tool, and storage area
fragrances, fashion jewelry, accent network and blade server hardware with virtual server support.
furniture, and home decor at big
rapid growth requires solid business processes and every
savings every day.
competitive advantage
Challenge With the new infrastructure in place, Gordmans executives turned their focus to updating
Streamline the markdown process back-office applications. The team identified lifecycle price optimization software as the
while increasing margin and next step in streamlining business processes.
maintaining store level sell-through Gordmans “…faced unique challenges with the merchandise mix due to a broad
rates. assortment of softlines apparel and hardlines home decor,” said Michael James, chief
financial officer, and the traditional method of national-level markdown pricing wasn’t
Solution
providing the necessary competitive pricing edge.
A software solution that optimizes
markdowns in real-time and delivers In early 2006, a formal review of lifecycle price optimization solutions was launched and
included the following stipulations:
bottom-line results.
n Pricing scenarios had to maintain consistent sell-throughs by store
Key Benefits
n Markdown processes were to be streamlined
Ability to take every store’s unique
n Process efficiency and methodology required definition
selling and traffic pattern into
account through store/item level
By year-end, Gordmans partnered with DemandTec (then Applied Intelligence Solutions,
optimizations with precise markdown
or AIS) to install best-of-breed lifecycle price optimization technology.
recommendations.
Standard markdown procedure with the existing system meant managing multiple
spreadsheets and legacy “green screen” applications across multiple locations. Pricing
decisions were based solely on historical sales data shared via paper reports. Finally,
unclear metric parameters made it difficult to select optimal and timely price points or
CompAny snApshoT define the most efficient use of markdown budget dollars.
n Revenue: $400 Million markdown recommendations prove invaluable in an uncertain economy
After 12 months of intense product review and on-site presentations from three final
n Market Sector: Department Store software vendors, the management team and merchandising group selected DemandTec
n Geography: Midwest USA Lifecycle Pricing for Softlines (then Applied Intelligence Solutions MarkdownXpert™) as
the technology of choice.
www.demandtec.com

2. CusTomer suCCess sTory
Selection was based on the following criteria: Gordmans “…faced unique
n DemandTec provides focus to a company of Gordmans’ size challenges with the
n DemandTec provides flexible grouping and filtering of stores, regions, and other attributes merchandise mix due to a
n DemandTec forecast techniques work at the store / SKU level broad assortment of softlines
n DemandTec optimizes in real-time so users can make changes and reoptimize on the fly apparel and hardlines home
n DemandTec’s streamlined user interface delivers faster reporting and decision-making decor.” An aggressive
capabilities
approach to pricing was
The project kicked off with DemandTec professional services and the Gordmans’
implementation group defining optimization targets based on corporate business goals. the necessary next step
Based on those guidelines, the DemandTec analytic team configured Lifecycle Pricing to streamlining markdown
for Softlines to recommend optimal clearance price and timing strategies while tuning the
decisions.
solution to optimize multiple targets such as turnover goals for disparate merchandise,
opportunity cost, and inventory turnover. Michael James
Chief Financial Officer
For the next 90 days, Lifecycle Pricing for Softlines provided recommendations for all price Gordmans
reduction decisions and generated weekly views of item performance alongside forecasts
based on data from the item and store level. Weekly/monthly markdown budget usage
reports identified (a) SKUs requiring urgent action, (b) optimum price points and timing, and “we verified significant
(c) recommendations of which stores required price reductions versus those that didn’t. increases in gross margin
Finally, the “real-time” optimization engine recommended pricing scenarios fully supporting by processing data typically
existing business constraints.
not taken into consideration.
Data gathered over the first three months was then used to further tune the engines.
Lifecycle pricing for softlines
Key performance indicators were refined to:
n Maximize
incontrovertibly demonstrated
actionable and measurable performance
n Drive
an unparalleled capacity
comparable store sales increases across all divisions to maximize performance by
location for processing massive
n Reduce the time spent reviewing prospective markdown opportunities amounts of data to get the
n Establish a streamlined markdown process most precise forecasts and
n Increase consistent decision making throughout the planning organization recommendations.”
n Enhance markdown methodology and execution productivity and Pavel Zelinsky
n Increase the sales margin while maintaining residual inventory margins Sr. Director, Science Engineering
DemandTec
Benefits for Gordmans
Optimization at the store/item level combined with precise recommendations in the timing
and depth of markdowns presented Gordmans with an unprecedented capability to take
every store’s unique selling and traffic pattern into account (See table below). Data revealed
that a “one price fits all” approach typically used in national pricing didn’t fit most stores.
Instead, different selling patterns per store required different markdown levels at different
times. Stores with slower sales patterns required a completely different markdown approach
than stores rapidly moving inventory.
Analysis of Store Groups by Sales Patterns—Slow, Normal, Fast
Deeper markdowns provided faster sales and
Stores with SLOW sales pattern
inventory turn
Balanced markdowns provided sales and margin
Stores with NORMAL sales pattern
improvement
Shallower markdowns provided higher margins,
Stores with FAST sales pattern
maintaining sales rate
Source: Lifecycle Pricing for Softlines Implementation Overview, March 2008
DemandTec, Inc.
One Franklin Parkway, Building 910 n San Mateo, CA 94403 www.demandtec.com
tel 650.645.7100
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