Holiday markdowns should force sell thru - SKUFood
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Holiday markdowns should force sell thru

We would really like to share photos from coast to coast of holiday merchandising. When (not if) you are in the stores it would be awesome if you shared some photos of your products or just great holiday merchandising. The purpose of our SKUFood newsletter is to share information so what better thing than to show people across the country what is happening. You can send your photos to or

Please let us know where the photo is and we will share them between now and the end of the year.

There are many industry terms people ask about. This year we are taking a different term each week to define and share some applications.

Holiday markdowns are price reductions implemented for seasonal items if the products do not sell thru by a predetermined time. Retailers and suppliers have learned that it is better to reduce the price earlier and not ‘hope’ sales will pick up closer to the holiday. Experience tells us seasonal items are worth very little once the season has passed.

Many retailers will negotiate the level of markdown in advance with suppliers. This would lead them to agree on the sell thru and the discount amount. If possible, sales history is used to predict the desired sell thru at specific dates. If the product is not delivering the sales this will trigger the discounts to be implemented and the supplier to be charged to cover the cost of the markdowns.

Holiday markdowns can be a good thing for both retailers and suppliers

In a perfect world, every seasonal item would have 100% sell thru. The supplier delivers 1,000 cases of product and the day before the seasonal selling period ends it is all gone. Unfortunately, we do not live in a perfect world and consumers are difficult to predict. A plan negotiated in advance when cooler heads prevail should be a good thing for both parties.

Selling seasonal merchandise is a risk. You need to plan in advance, order inputs produce products and get them shipped to your customer. Then the customer must get the items out on the floor and drive enough consumers into the store to generate the sales. While both parties need to deliver the right value proposition, so consumers pick up the products.

It is a good debate-where should the risk lie?

Should the supplier who produces the product just get paid full price and walk away? Retailers do not see it that way.

Should suppliers bear more of the risk because the product did not deliver value and did not sell? Suppliers do not see it that way.

Chances are both parties should share in the markdown. It can be difficult to determine why an item does not sell thru. There are a number of factors that can influence sales:

  • Competition for the item
  • Retail competitors generate more store traffic
  • Consumers buy less or focus on other items
  • Weather if the item has a very tight seasonal window like seafood for New Years
  • The product does not perform as promised or if it is fresh does not have the predetermined specs or standards
  • The retail price is set too high
  • Store execution is poor
  • The inventory does not move through the system in a timely manner

Some of these factors are controllable and others are not. One of the advantages of negotiating the program in advance is the emotion will be at a better place. In other words, you should be able to have a rational discussion and it will not be influenced by other seasonal issues. For example it is better to negotiate with a category manager in advance than when their category is behind budget by 15% and they are looking for every dollar they can find.

What suppliers should try to negotiate in advance

When you are presenting seasonal products, you should be prepared for the conversation about mark downs. The best way to reduce or eliminate mark downs is to put the right amount of inventory into the system. It is great to get a huge PO but if it doesn’t sell thru you really don’t win.

Use history and your understanding of the current market conditions to create your product forecast. This is the first number you will have to agree on.

Once you have the total volume, anticipate the retailer’s expectation for sell thru and what markdowns they will expect. Then you can figure out what this could cost you. For example if you are selling 1,000 cases and they will want a 25% markdown if 80% of inventory is not sold by December 15th you can figure out it will cost you 25% of the retail price on at least 80% of the inventory.

There are some factors that can have a negative impact on sales that retailer’s control. It is always a concern for suppliers if they have to fund markdowns and retailers do not execute. If possible, negotiate dates and merchandising plans into the program. When consumers start to shop for seasonal items there is a limited window to deliver the sales. Your inventory needs to be out on the floor in enticing displays. Propose dates and check the stores to ensure execution is in place.

Confirm any promotion activity and check to make sure they execute in the ad as well. These factors can have a significant impact on sell thru.

If your item needs to sell thru by December 24th and it is supposed to be on the floor November 1 that is 54 days of selling time. If your customer is 5 days late getting it out that is 10% of lost selling time.

If you see issues, make sure you do everything you can to understand what the issue is. I have seen holiday items stuck in the warehouse because they had a data integrity issue. If everything does not happen as it was planned there is a reason and when time is of the essence you will need to get it resolved as quickly as possible.

If you have any questions about seasonal programs, you can always send me an email or call me at (902) 489-2900.


Progress on industry code of conduct

It is encouraging to see our industry moving on the issue of a code of conduct. I still believe we have robust laws to govern commerce which should be enough. The issue is when there is a dispute how does it get resolved. This is where the power of retailers is unfair.

It is great they are making progress but interesting to note the dispute resolution is still not resolved. Almost ironic they cannot agree on it!

FCC food report on bakery and tortilla

It is so important to understand where you are performing, relative to your category. The reports published by FCC are a great resource to use.

If you are growing faster or experiencing better margin results you can feel good about your business. If you are falling behind then you and your team need to dig in to figure out what is happening.

Where is Peter Speaking?

Learnsphere/Alberta Food Processors Assoc Dec 6th

Calgary, Alberta Pitching your products

Learnsphere/Alberta Food Processors Assoc Dec 7th

Edmonton, Alberta Pitching your products

Alberta Agriculture Jan 26th

Getting Alberta products on the shelf

Alberta Agriculture Feb 9th

Getting Alberta products in the shopping cart

Learnsphere Feb 16th

Perfect your pitch

I am excited to join the Alberta Food and Bio Processing Branch for a webinar in February. The retail market continues to evolve as consumers and customers are changing, as well as the impact from the recent pandemic on this market channel. We will provide an overview of what is happening in food and beverage with a focus on Alberta products and how to price products and the promotion plan required to get on the shelf. We will break down some of the costs and your return on investment including: category based pricing, setting your price and getting your price; your trade spend investing with retailers and your marketing spend connecting with consumers. You will hear about growing your baseline and take away a glossary of terms and a tool to help build your promotion plan.