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http://ssrn.com/abstract=1731402
 
 

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Clearance Pricing Optimization for a Fast-Fashion Retailer


Felipe Caro


University of California, Los Angeles - Anderson School of Management

Jérémie Gallien


London Business School

November 24, 2010


Abstract:     
Fast-fashion retailers such as Zara offer continuously changing assortments and use minimal in-season promotions. Their clearance pricing problem is thus challenging because it involves comparatively more different articles of unsold inventory with less historical price data points. Until 2007, Zara used a manual and informal decision-making process for determining price markdowns. In collaboration with their pricing team, we designed and implemented since an alternative process relying on a formal forecasting model feeding a price optimization model. As part of a controlled field experiment conducted in all Belgian and Irish stores during the 2008 Fall-Winter season, this new process increased clearance revenues by approximately 6%. Zara is currently using this process worldwide for its markdown decisions during clearance sales.

Number of Pages in PDF File: 35

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Date posted: December 27, 2010  

Suggested Citation

Caro, Felipe and Gallien, Jérémie, Clearance Pricing Optimization for a Fast-Fashion Retailer (November 24, 2010). Available at SSRN: http://ssrn.com/abstract=1731402 or http://dx.doi.org/10.2139/ssrn.1731402

Contact Information

Felipe Caro (Contact Author)
University of California, Los Angeles - Anderson School of Management ( email )
110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
Jérémie Gallien
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
HOME PAGE: http://faculty.london.edu/jgallien/
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