21.02.2020  |  Branchenyt

Case: Galeria Karstadt Kaufhof Extends its AI-Driven Markdown Pricing Strategy with Blue Yonder

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Leading European retailer extends the scope of Blue Yonder Luminate Clearance Price, infused with Blue Yonder’s leading AI algorithms, to optimize prices for Karstadt Warenhaus, Karstadt Sports and Galeria Kaufhof

Galeria Karstadt Kaufhof – a leading European department store retailer – extends the scope of Blue Yonder® Luminate Clearance Price to optimize their markdown pricing strategy across all its fashion departments including Karstadt Warenhaus and Galeria Kaufhof. The artificial intelligence (AI) driven solution selects the optimal price at every stage of the product lifecycle and has been successfully in use since April 2018 within Karstadt department stores. Due to its proven flexibility and benefits as well as its seamless integration into existing processes within ambitious time scales, the solution is now being rolled out to Karstadt Sports and Kaufhof stores.   

The Galeria Karstadt Kaufhof department store group runs over 243 established sites in Germany with about 32,000 employees. Galeria Karstadt Kaufhof offers a variety of international brands and high-quality private labels through its prime location, brick-and-mortar stores and its online shop. The brand promises: ‘We make shopping more enjoyable and life easier for our customers: in the city and beyond.’

As part of its digital transformation, Galeria Karstadt Kaufhof leverages the powerful AI-based pricing solution from Blue Yonder to generate better markdown results: Sell through is accelerated while profit is maximized. The recent merger of Karstadt Warenhaus and Galeria Kaufhof led to an increased sales volume, which is managed by automating large parts of the demanding pricing process. Luminate Clearance Price goes beyond ‘gut feeling’ and rules-based pricing to deliver data-driven, continuously optimized prices based on demand forecasts on the finest levels of granularity – on day, store, product, color and size-level.

Automation is lifting the burden of manually tracking every product. Weak articles are identified proactively and their price is automatically adjusted. Nevertheless, all decisions remain transparent to Galeria Karstadt Kaufhof’s  assortment managers. Within comprehensive reports provided by Blue Yonder, managers can dive into a 360-degree-view of the entire assortment performance. This combination of automation and transparency strongly supports the company to put its overall pricing strategy into practice while at the same time facilitating to find the rare individual decisions the teams/assortment managers still like to control manually. Using Luminate Clearance Price, little effort is required to offer all shoppers the best price every day and everywhere, and quickly implement changes in the company strategy.

Luminate Clearance Price is fueled by a price elasticity model on product-store-day-level to evaluate the demand for all relevant price values. The business objective function is computed for each possible future price trajectory, based on the predicted demand and current stock levels.

“Luminate Clearance Price inhales that retail is detail: Markets and consumer behavior change daily, from store to store, from one product to another. These dynamics overstrain manual or rule-based pricing strategies and require AI for optimal prices. Luminate Clearance Price gives Galeria Karstadt Kaufhof an automated, intelligent way to change prices, based on predicted consumer demand,” said Johan Reventberg, president, EMEA, Blue Yonder. “With our AI-driven pricing solution, Galeria Karstadt Kaufhof determines the right price for each individual item to ensure continuous shopper satisfaction, bottom line and sell-through targets.”

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