Walk through a department store at the end of a season and the signs tell a familiar story: 40% off! 60% off! Clearance! Retailers often treat these markdowns as a tactical problem, the result of the wrong product, the wrong promotion, or bad weather effects. But they are better understood as confessions. They reveal the downsides of the traditional retailing model. The retailer acted as a merchant, committed to inventory before demand was known, absorbed the risk of being wrong, and then paid for that error in margin erosion and brand equity dilution. Under this merchant model, retailers routinely take on more risk than they can handle.
Business
The Store Isn’t Dead—but the Merchant Model Is
Walk through a department store at the end of a season and the signs tell a familiar story: 40% off! 60% off! Clearance! Retailers often treat these markdowns as a tactical problem, the result of the wrong product, the wrong promotion, or bad weather effects. But they are better understood as confessions. They reveal the […]
