Matisse Sheena’s Weekly Rant-The Dreaded Markdown
by JULIA
Honestly I really don’t have a whole lot of comentary for this one. I do not know a whole lot about this subject except that I hear reps complain about it a lot. For the record, I gave her the topic “markdowns”, she added the dreaded part. 
The disclaimer reads: “Sheena’s Weekly Rant is meant for entertainment purposes only and does not necessarily reflect the opinion of all Shoebizness contributors. Here on Shoebizness we like to highlight all different perspectives.” -Julia
THE DREADED MARKDOWN
The toxic term “Markdown” is known by all in the industry. The meaning of the word however differs from case to case and from retailer to retailer. This unholy act should be outlawed, as many would probably agree. If you do not agree, please re-direct your browser to Yahoo and check the stock market.
Scenario 1: Your buyer from (enter dept store name here) calls you up and starts bitching about performance and margins and whatever other reason he or she can lay on you. Either way, it’s all your fault! You are completely responsible therefore you have to pay for these sins. As we all know, markdowns can vary but can also be huge and kill absolutely any profits you had in the deal. A frequent trespass we run into involves said buyer “re-designing” our original prototype then blaming us for it not selling. I will never understand that concept. If you are buying from a line that employs perfectly capable designers, why would you second-guess a style you are interested in? I mean, if they didn’t like the shoe to begin with, why even f*&$@ with it!?!? We hate to say it but “we told you so”.
Scenario 2: Selling is poor, due to economic reasons beyond your control or poor merchandising. Again, either way it’s all your fault. Your buyer calls up and asks for markdown dollars. In return buyer promises you “X” amount of open to buy for the following season. You agree to cut the check, of course. This results in a deadly cycle of overbuying and tons of markdown money going forward, as the dance keeps repeating from season to season. We see it all the time; buyers are literally married to vendors in order to keep the “Suits” happy.
Now, does any of above make sense? Probably not. I’m sure there are readers who will bitch and moan that I’m an idiot and don’t understand the situation and so on and so forth. Whatever, you know as well as I do there is a certain level of accountability that comes with the job as a buyer. I know I’m always a little preachy on these subjects, but I can resist ranting about what everyone thinks but don’t verbalize. If we all stand as a united front, we can beat our oppressors. Who’s with me?
No one? Really? It’s Ok, you’re probably just scared, keep cutting those checks. When you pass me in business class on the next United flight out to FFaNY, be sure to wave as I sip my free cocktails.
-Sheena
More about: Panoptical Perspectives • Julia
Sheena is right! :
Just say no to MD money. I never saw a retailer cut a check to a vendor when the shoe overperforms to plan!!!
As a past department store and specialty store buyer I know that focusing on MD $ vs. focusing on great product is a recipe for disaster.
Ken :
I am with you Sheena! Thanks for having the b-lls to write this! This is all part of the monkey dance.
One word of advice that someone gave me a long time ago”don’t ever look for justice in your customers”.
Ken
William Weiss :
Sorry, Charlie(s) — I wholly disagree.
I think we’re talking about two different things here: markdowns, and markdown MONEY. Two different things. Markdowns are part of the party, and any retailer must figure these into his/her business plan. I believe the title of her piece should be Say No To Markdown Money.
However, IMHO, the need/request for markdown money is merely a symptom of a larger ill — that the plan for business with the retailer was a. not sound, or b. not agreed to by both parties. A sound plan has an inventory flow, margin goals, markdown targets and sell through percentages built in. At the end of the season, if you’ve been flowing in product correctly, there should be less of a need for $$ to close the gap. And this ends the “cycle of overbuying”.
In fact, “buying” is the problem here; retailers should be SOLD the product they need to have a healthy, profitable business. If retailers are cherry picking the line (or, in Sheena’s case, redesigning it) then that’s not part of the plan, and therefore you can’t be held accountable for it. Why not present the retailer with a tight plan based on all the variables above, and then execute it? Or, in the words of Colin Powell to George W re: Iraq, “you bought it, you own it.”
I have a hard time placing fault solely with retailers when it comes to MD $ — we should be managing the business away from this DURING the season/year, and not whining when it’s time to pay the piper at the end.
If I get in front of a retailer, show shoes, let him or her buy what he/she wants, in the quantity he/she wants, and then sit back, batten down the hatches and hope for the best…well…it’s out of my control.
Now, from what I know, Sheena’s business is fashion driven, with highly perishable product — taking out merchandise, or managing flow, or using core product to balance an assortment might not be options here…I get that. But if that’s the case, and business must be done with accounts who need to be made whole at the end of a season, then the MD$ need to be figured into the wholesale business plan!
Just my two cents — sorry to pour water on the fire.
Ken :
Willie,
I understand your perspective from a major brands point of view. However, I feel strongly that there needs to be a shared liability. Because there are more brands than retailers, a tail wagging the dog mentality sets in. Charge backs, returns, margin checks, advertising support, contest money, slat shelves..and the list goes on. If I don’t agree to it, there are other brands that will and I will be replaced. In the end, money that could be used towards product must be redirected to margin checks. At the end of the day, it is the consumer that loses.
William Weiss :
First of all…”Willie”? I’ve got an image, you know.
Second — yours is EXACTLY my point … even the smallest shoe brand, bringing a tight sales plan to the table, creates a SYMBIOTIC relationship between brand and retailer — one where each one has some “skin in the game”, and (most importantly) expectations are set accordingly. I’m not saying that MD$ are a non issue (I’m a realist, for crying out loud) but with the right mindset on the part of both parties going in, they can be minimized.
William Weiss :
and…by the way…let’s say I work for Teeny Tiny Shoe Company X, and go to a customer (big or small) who I want to buy shoes. I don’t have the wherewithall or desire to make a whole sales and OTB plan…and the retailer would laugh at me if I did…but what if I simply said “you won’t lose money on this shoe”, i.e. you’ll sell enough that the sku will be profitable (say, 55% of what was shipped,or whatever you negotiate with the customer). If at the end of the season, you fall short of that sell through, you either clean up the shoes or give MD$ to get them straight. Either way, you have an exit strategy, the customer’s expectations are set correctly, and YOU can plan for it.
Ken :
William –
Your point is well taken…We have two seperate mind sets here. The important point is that we now have a forum to discuss and debate issues relevant to the business.
K
William Weiss :
Kenny: don’t be so nice — ARGUE, DAMMIT — it’s much more fun. And yes, it’s great to have an argument forum!
