Fashion retailing is emerging as one of the most challenging areas of business
activity in the western world. Uncertainties in demand, shrinking selling seasons,
lengthening delivery lead times, increasing competition and thinning margins
together make the job of the retailer truly daunting.

Typically, the demand for fashion goods develops during the course of a limited
fashion season in the shape of a bell-shaped curve representing the beginning,

growth, peaking and decline phases of the fashion life cycle. The bell may be
skewed to the right or the left depending on the specific characteristics of an
item. The demand at each price in each period of the season is uncertain and the
sensitivity of demand to price varies during the season. Goods left over at the
end of the fashion season fall drastically in value because demand practically
disappears when the fashion season is over.

There are two related problems that retail buyers need to deal with day in and
day out in the fashion retail industry:

      a) How much to procure and
      b) When and how much to markdown

in order to maximize profitability over the entire selling season.

Marking down too less and/or too late could lead to unsold stocks at the end of
the season causing heavy losses. On the other hand marking down too heavily
and/or too early exhausts stocks at unnecessarily low profitability early in the
season with massive opportunity losses.

Presently, Retail Buyers do this balancing intuitively based on experience and
“gut feel”. Clearly, intuition alone is not adequate to deal with the inherent
complexity of the fashion retailing business. Decision-making on critical issues
such as procurement and markdown management needs to become a lot more
scientific in order to thrive in this demanding environment.