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In Between the Numbers: Markdown Money: the Key to Technology Adoption?

October 11, 2011
at 11:02 pm PST

I have been asking myself why this personal technology revolution is so hard for retailers.There are a number of pretty obvious answers on the surface.

The pace of innovation, for one. Given that the standard in-store technology refresh cycle is often measured in decades, it’s more than a bit frightening to think that today’s all-store devices might be old school in six months.

The fact that it’s about more than devices and apps, for another. Smart retailers know that the operational implication of the revolution is a single-brand, multi-touchpoint, flexible fulfillment future. Which will be millions and years in the making.

Which is enough to give any CIO – let alone CEO – pause.

I wonder, though, if there’s not another big reason. One that’s buried deep inside the financial fabric of retail. 

Back when I was in the business, it was clear that MDF – market development funds (or “markdown monies” if at year-end) – was the grease that allowed the merchandising wheel to spin round and round. It paid for end-caps, aisle displays, and Sunday circulars, made the vendor and department margins acceptable, and allowed next year’s orders to be placed.

It also often provided – in a sweet, often thick ooze – a portion of the net margins that bought management yet another year.

As we in the technology industry look ahead to the personal technology future and its implications for the store, the real question may be less about how we enhance the customer experience, and more about how we enable merchants to extract MDF from vendors.

As we think about swapping merchandise-laden end caps for interactive screens, it may be less about interactive screens and more about management tools that measure impressions and clicks that enable that square footage to continue to generate MDF.

It may be more about the ability to “sell” dayparts, parsed down to 10-second increments, with secure audit trails. 

 It may be more about understanding the retailer as a website – and not as a store.

Food for thought.

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