Price Optimization at Northern Group Retail

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Case Details:

Case Code : MKTG085
Case Length : 9 Pages
Period : 2002-2003
Pub Date : 2005
Teaching Note : Available
Organization : Northern Group Retail
Retail ing
Countries : Canada

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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New Software Begins to Pay Contd...

The new software was expected to enable the company to reap the best possible returns from each SKU⁶, by selling it at the highest possible price in relation to demand. Northern Group was expected to post its first profit in three years in January 2004.

Background Note

Northern Group was set up in 1985 as a subsidiary of FW Woolworth Company (Woolworth). Woolworth was founded in the US in 1911, by Frank and Charles Woolworth.

It was five-and-ten cent⁷ store selling general merchandize. The stores became very popular in the US and Canada.

The business peaked in the 1950s and 1960s, when there were over 1000 five-and-ten cent stores in the US. Woolworth also founded a discount chain called Woolco in 1962.

However, due to increased competition from other discount stores, notably Wal-Mart⁸ and increased urbanization, Woolco lost its appeal and business began to fall. Eventually, the chain was shut down in the US in 1982. In Canada, however, it operated till 1994, when the 144 stores operating in the country were sold to Wal-Mart.

In addition to Woolco, the company ran general merchandize stores; it also operated a number of other retail chains, including Foot Locker, Champs sporting goods, Kinney Shoe, and Northern Group apparel shops.

The Woolworth company ran into trouble in the early 1990s due to outdated business methods and increasing competition. In 1994, the newly appointed CEO Roger Farah, undertook a restructuring of the company to put it back on its feet.

He realized that the five-and-ten-cent store concept had lost its appeal and shut down 400 stores operating in the US and Canada.

In 1997, he changed the name of the company to Venator Group Inc. (Venator). In the late 1990s, the performance of the Northern Group stores also began to decline. Analysts attributed the decline to its outdated pricing and inventory management systems and increasing competition in the apparel market from a growing number of speciality dealers...

Excerpts >>

6] SKU stands for Stock Keeping Unit and is a number associated with a product for inventory purposes.

7] Five-and-ten-cent stores sold discounted general merchandise at fixed prices, usually five or ten cents.

8] A very successful discount store based in the US, Wal-Mart was well known around the world for its huge stores which carried a large variety of general merchandize at very low prices. By 2003, Wal-Mart had over 4000 stores around the world.