Markdown Pricing in Ecommerce With Data Science

You have seen the different areas where markdowns are generally implemented. But what are the reasons behind marking down prices? Let’s find out.

 There are some other possible reasons for price markdown.

Markdown is used to improve store footfall. 

Footfall is the number of people visiting the store. This has nothing to do with the number of people who purchase a product. Traffic is another word used commonly for e-commerce platforms, where it indicates the number of people visiting the e-commerce site.

Store traffic or footfall has a high correlation with units sold and, therefore, the revenue of the store/site. However, this is true only if the conversion rate, or the percentage of people who purchase an item out of all the people who visit the site, remains almost constant.

Remember that higher revenue could be because of two reasons:

1. Improved traffic/footfall

2. No traffic improvement but the same customers bought more items

In most cases, when there is significant markdown, retailers advertise about it, which increases footfall/traffic to the store/site. At the same time, people purchase more than usual at lowered prices. So, the impact on the revenue due to markdown generally occurs because of both these factors together. In case the retailers don't advertise the markdown, any revenue uplift would be mainly because of the second factor.

Markdown is used as a measure of quality control.

There are at times when products sustain slight defects:

• A manufacturing defect
• A defect due to mishandling
• Any other kind of damage

In cases where these defects are very minor and rarely identifiable, retailers try to price the products down and sell them instead of throwing them away. Many customers, therefore, are very cautious before buying products during a heavy sale.