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Markdown-onomics

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Software programs like Chavie’s are loaded onto company intranets, where they give retail executives markdown suggestions on a daily basis. And lording over those programs are two numbers, the desired minimum gross margin and the ever-important desired comp. During the year, when sales aren’t as closely tracked and executives can use excuses like hurricanes and the timing of spring break to explain away lackluster comps, retailers might worry about their margins. But in December, comp is all anyone cares about.

Which is how the post-Christmas sale leapfrogged in front of Christmas.

In 2003, Saks Inc., the owner of Saks Fifth Avenue and assorted mid-range department stores in the South and Midwest, invested in a state-of-the-art markdown-optimization-software package. Humans and computers tend to mark down goods differently: The humans take multiple terraced markdowns, and the computers like to make a single swift, dramatic cut and hold steady for longer.

Around December 21, a computer at Saks Fifth Avenue apparently determined that a swift, dramatic cut was in order. “It was a last-minute decision, but it worked,” says an employee. “It got attention.”

The price of the emerald-green blazers fell below $100, a price at which one was picked up, along with two other 40 percent–off blazers and a full-price black dress, by one Pamela Wallin, Canadian consul general to New York. Twelve remained on the sale rack, the contents of which, a saleswoman told me, would be shipped out the following week—most likely to a distribution center for the company’s Off Fifth outlet stores. The rack already had that forlorn, outlet-store look. Wallin riffled through it with speed and mastery. When she lived in Canada, Wallin hosted the country’s version of Who Wants to Be a Millionaire.

But in New York, Trading Up co-author Silverstein says, even millionaires can be extremely price-sensitive people, because the environment is such a “tempest” of hyperconsumptive behavior. In a new book about bargain hunters, Silverstein profiles a waiter who goes on systematic end-of-season shopping sprees at Diesel and Armani, stocking up on Rubbermaid containers to store it all. A friend of mine in Williamsburg even invested in the collapsible hangers, and on a recent Saks visit, I found myself handing over the old AmEx to buy one dirt-cheap “Cavalli-esque” dress. There’s a bit of the Leopard Lady in all of us.


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