Leder & Schuh Group Boosts Margins with AI-Powered Centric Pricing & Inventory

“It was taking five people 5 days to do the markdown management.”

Josef-Bernd Oswald, Product and Merchandise Manager and Managing Director of Purchasing, describes the number of staff dedicated to markdown management, explaining that it took five people, 5 days straight, each time markdowns were done. “We didn’t have the resources to do price reductions on every country individually,” notes Oswald. After adding Centric Pricing & Inventory™ to their toolbox, it’s a different story. “With Centric Pricing & Inventory we can now make reductions in all the countries we serve like Hungary and Slovenia. This is a big benefit.”

150+ Years of Sales

Established in 1872, HUMANIC became the largest shoe manufacturer in central Europe, with a strong presence across the former Austrian-Hungarian empire. Having persevered through the years, the company is thriving today. An established market leader in Austria, and carrying out manufacturing operations up until the 90s, Leder & Schuh also owns the brand Shoe 4 You. With a wide selection of international footwear brands for women, men and children in the mid-to-upper price range, the company has a retail presence in 9 countries such as Germany, the Czech Republic, Slovakia, Croatia, Romania and Bulgaria. Leder & Schuh also conducts sales via their website, shipping elsewhere.

Man vs. Machine

The company was looking to improve margins and reduce the amount of busy work. After viewing a demo of Centric Pricing & Inventory, Leder & Schuh talked to other users. Oswald says, “We did our research and some interviews with fellow retailers. There were not many other solutions which had a focus on markdown management—it was quite a new thing.”

They decided to run a test in one market, comparing the Centric system recommendations to the manual process they had in place. The results were positive, and convinced the company to implement Centric Pricing & Inventory in 2019.

With Centric Pricing & Inventory, the human factor is removed from the decision-making. Product Line Manager, Jennifer Rösel-Gartler says, “The personal or emotional component isn’t a consideration with Centric Pricing & Inventory. Instead, it is strictly analytical.” Feelings about products can get in the way of making reductions at the right time. She explains, “For our buyers, the products are their babies and they may be reluctant to mark them down.”  But with the system, there is data to back up the proposed actions.

Good Timing + AI

It is physically impossible to do the reductions for the entire catalog, manually. Oswald points out, “You have 12,000 SKUs multiplied by the number of markets and all those price points. So, you cannot do the reductions in an optimal way with only five people working on them.”

With Centric Pricing & Inventory, an AI-powered predictive solution, the reductions are made at an earlier stage in the game. “Thanks to Centric’s AI automation tools, the markdowns happen sooner and in smaller increments. This results in a flatter reduction curve and in the end, a better margin in terms of the entire lifecycle of the product. In many cases, we also get better turnover.” And, as noted above, all geographies are covered—a big benefit.

Business Process Improvement

Centric Pricing & Inventory is used across the business: women’s, men’s, kids and the different brands and countries. It is used in the planning, merchandising, pricing management and stock controlling of what is in season—quantities must be monitored. Leder & Schuh uses Centric Pricing & Inventory to define business rules. “With the rules, you can guide the system. You can choose to have a more aggressive or defensive posture. What the targets are and so on,” says Oswald.

Inventory

Having Centric Pricing & Inventory has cut down on surprises with respect to inventory. “We can rely on the system,” says Oswald. The system validates the data or lack of it, so indicates when manual markdowns must be done. With sufficient data, when there is pressure on the inventory, there is the option of switching modes, for example, “To keep the inventory goals, you can switch the algorithm to be more aggressive.”

Labor Savings

One of the main goals of bringing on Centric Pricing & Inventory was the labor savings. As was mentioned, it took five people 5 days to make price reductions that didn’t even cover all the countries, nor was it tailored to each product. Now, it only takes two people 1.5 days to complete the markdowns. That’s a huge reduction in person-hours in the order of 88%, (based on an 8-hour workday), freeing up people to work on more value-added tasks.

Use It or Lose It

As with any platform, ease of use is paramount. Rösel-Gartler says, “The interface is super easy. You don’t need a lot of training to use it.”

Proof is in the Numbers

The other goal, the one that has the greatest impact on the company, was improving margins. After running with Centric Pricing & Inventory, that has proven to be true. “When you see that sell-through rate is not good enough, that the planning does not fit with the data you get from the market, is when we take action to adjust prices. We have reduced our price reductions by about 2.5%. That translates into a 1% margin increase, which, on a 300 million-euro turnover, is a 3 million-euro increase to our bottom line,” says Oswald. “That’s quite a lot; more than we were expecting at the beginning of the project. We are only counting product reductions, not promotional sales.”

What’s Next

Looking to drive even more efficiency, Leder & Schuh has initiated a replenishment project. They are also looking at adding Centric Planning^TM. Oswald says, “We have had a couple of meetings regarding this already, and think that Centric Planning is going to be the next big thing for us.”