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Clearance Pricing and Inventory Policies for Retail Chains
Abstract
Clearance pricing and end of season inventory management are challenging and important problems in retailing. Sales rates depend upon price, seasonal effects, and the remaining assortment of items available to customers. There is little time to react to observed sales, and pricing errors result in either loss of potential revenue or excess inventory to be liquidated. This paper develops optimal clearance prices and inventory management policies that take into account the impact of reduced assortment and seasonal changes on sales rates. Versions of these policies have been tested and implemented at three major retail chains and these applications are summarized and discussed.
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When inventory is low, the remaining items are usually those that are less attractive to customers.
“This fact is known as the broken assortment effect and it is especially prevalent in apparel since, when inventory is low, the remaining items are usually those that are less attractive to customers (see Smith and Achabal 1998 and Section A-3 in Fisher and Raman 2010).”
From Clearance Pricing Optimization for a Fast-Fashion Retailer (2012) · cites this paper as Smith and Achabal 1998
These last three references only contain limited example data and do not discuss the methodology used for calculating the impact estimates provided.
“However, these last three references only contain limited example data and do not discuss the methodology used for calculating the impact estimates provided.”
From Clearance Pricing Optimization for a Fast-Fashion Retailer (2012) · cites this paper as Smith and Achabal 1998
In retailing it has been well-documented that the demand rate of an article usually declines when the inventory goes below a certain level.
“In retailing it has been well-documented that the demand rate of an article usually declines when the inventory goes below a certain level.”
From Clearance Pricing Optimization for a Fast-Fashion Retailer (2012) · cites this paper as Smith and Achabal 1998
Smith and Achabal (1998) report the only other observed relative financial impact of a markdown optimization system implementation in the literature.
“To the best of our knowledge, Smith and Achabal (1998) report the only other observed relative financial impact of a markdown optimization system implementation in the literature.”
From Clearance Pricing Optimization for a Fast-Fashion Retailer (2012) · cites this paper as Smith and Achabal (1998)
For the most successful of three implementations described in Smith and Achabal (1998), the realized income increased 4% over the previous year.
“for the most successful of three implementations described in that paper it was observed that the realized income increased 4% over the previous year”
From Clearance Pricing Optimization for a Fast-Fashion Retailer (2012) · cites this paper as Smith and Achabal (1998)
Citations
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References 27 · Cited by 214
Research works printed but not linked: 26
- Achabal Dale, 1990, J. Retailing, 66, 383
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- Wolfe Harry B., 1968, Indust. Management Rev.(now Sloan Management Rev., 9, 69
Metadata
- Authors
- Smith, S. A., & Achabal, D. D.
- Affiliations
- Santa Clara University (US)
- ORCID
- Smith, Stephen A.
- Venue
- Management Science
- Published
- 1998-03
- Volume
- 44
- Issue
- 3
- Pages
- 285-300
- ISSN
- 0025-1909 (ISSN-L)
- 1526-5501
- OpenAlex
- W2109216884
- Cited by
- 214
- References
- 27
- Citations by year
- 2026: 2 · 2025: 4 · 2023: 3 · 2022: 6 · 2021: 5 · 2020: 7 · 2019: 16 · 2018: 6 · 2017: 12 · 2016: 11 · 2015: 11 · 2014: 8 · 2013: 12 · 2012: 14
- FWCI
- 5.71
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Management Science (publishedVersion)
- Topics
- Social Sciences › Decision Sciences › Management Science and Operations Research › Supply Chain and Inventory Management
- Social Sciences › Business, Management and Accounting › Marketing › Consumer Market Behavior and Pricing
- Social Sciences › Business, Management and Accounting › Marketing › Consumer Retail Behavior Studies
- Keywords
- inventory management, retail chains, sales rate, seasonal demand, product assortment, inventory liquidation, optimal pricing policy
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