REVENUE RECAPTURE STRATEGIES THROUGH CLEARANCE AND MARKDOWN PRODUCTS: A CASE IN HOME GOODS FURNITURE COMPANY

摘要

Zmart is a major retailer in the furniture and home goods market with over $3 billion in sales and over 2,000 locations. With a ～11% return rate, the company managed over $300 million in returns in 2019. While some of this revenue is recouped through the clearance program, additional expenses generated in receiving, managing, and selling clearance inventory are very high. Like most companies, Zmart tracks its sales, returns, and customer satisfaction (NPS) through various tools and metrics. Unfortunately, allocations of returns, markdowns, and clearance costs lack transparency at Zmart which leads to profit drain. To address this revenue loss, a detailed costing analysis of returns and clearance/markdown merchandise was conducted to document the costs associated with every step in the process. Focusing on mattress sales, returns and clearance we identify the greatest opportunity for recovery by eliminating profit drain at Zmart. Industry and non-industry best practices were explored to develop a set of revenue recapture strategies, including cost analysis, pricing structures, inventory stratification, and customer service evaluations for the overall product mix. The revenue recapture strategies developed to maximize clearance program revenues were aligned with the business model and value proposition. These strategies can be utilized in any industry to identify waste and eliminate profit drain. In Zmart's case The ROI of implementing these strategies was projected at a 60% increase in revenue capture and an 18% cost reduction, resulting in an additional $100 million in revenue and $40 million of profit annually. This paper outlines the revenue capture methodology and strategies developed that can be generalized and adapted to most retail, industrial, and B2B environments.