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By Erin Harris, Editor, Integrated Solutions For Retailers

The economy has created a need for retail markdowns, as price adjustments are made to spur the sale of goods. But, the markdown process can be extremely costly to your business if not managed correctly. I recently had a Q&A session with Rick Wescott, VP of sales at SATO Labeling Solutions on the importance of properly-executed markdowns. Here's what he had to say on the importance of label type to the markdown process, the benefits of effective markdowns, and more. For more information about SATO Labeling Solutions, visit www.satolabeling.com.

What are retailers doing correctly and incorrectly when creating markdowns?
According to our research, one in five retailers has an effective markdown process. These retailers are selling more targeted markdown merchandise quickly by making their markdown merchandise readily identifiable to the consumer. Typically, retailers use signs and brightly colored labels on the products, on the original price label, or on the hang tags, as these labels attract the customer's attention. The labels also have security slits so a label cannot be lifted off one item and be placed on another, as label switching is a component of shrink for the retailer. The markdown price is clearly identified, and the prior price is listed. The price includes either a dollar savings or percentage off so the customer is aware of the deal they are getting. The deal creates the impulse to buy as a savings. The greater the percentage off, the more likely a customer will buy the item. The correct markdown price is always charged at the POS.

Most retailers use colored pens and plain small labels to do markdowns. Neither of these solutions attracts a customer's attention. In the case of a handwritten markdown label, the price may be illegible, prompting queries to sales associate. If the customer does not receive an answer on the price quickly, they will probably put the item back on the shelf. In the handwritten markdown practice, multiple markdowns are shown, making it difficult to determine which price is the right one. The entire tag may become hard to read. Multiple markdowns usually render the markdown process ineffective. Pens can soil an apparel item with ink, making an item even more difficult to sell. Also, could a customer with his own ink pen write a price and create his own markdown?

Small plain white labels are somewhat more effective than pen markdowns in attracting a customer's attention to a markdown item. Typically there is only a price on the label, creating questions for the customer. While it is more legible to read than a handwritten markdown label, how does the shopper relate to the deal? What is the old price? How much will I save? The use of multiple markdown labels tends to block information on the original label or tag. The shopper may want to see that information. But, can they?