Pricing soloution in sap retail

Pricing Solution in SAP Retail
Jalil Mousavi
linkedin.com/in/jalil-mousavi-b1564756

© 2014 SAP SE or an SAP affiliate company. All rights reserved. 2
Purpose, Benefits, and Key Process Steps
Purpose
 Retail pricing provides retailers as well as wholesalers with a key opportunity to maintain
prices in a competitive, aggressively-priced environment
Benefits
 Boost margins, sales and the success of a company
 Test new products on the market
 Maintain prices in accordance to the market situation (competitor, price family,
prices at site level, site price list level, price point)
Key Process Steps
 Create retail pricing for different articles (single, generic, sales set…)
 Create price at different level (site, site price list, distribution chain)
 Create prices with price points
 Create price family, competitor pricing, market basket calculation, worklist

Article : Article Category

Sale set

Display

Prepack

Article : Process

Merchandise category

Merchandise Category Hierarchy

Merchandise category & Merchandise Category Hierarchy

Site Grouping

VSR(Vendor Subrange)

Purchase price conditions

Condition type

Time-Dependent condition

Header condition, Group condition, Item condition

Header condition

Group

Condition record

Calculation schema

Access sequence

Sale price calculation : Basic function

Pricing
Basics of pricing
Purchase-/sales-pricing
conditions, calculation schemes
Calculation of a single article
Calculation of a generic article
Calculation of a sales set

Sales Price Calculation: Basics
MM Conditions
Sales price
SD Conditions
Sales price
Margin resp.
actual mark-up

Sales Price Calculation : Basics
Data retention level
Level, on which gen. conditions (price, mark-ups, discount,
taxes etc.) can be saved.
Site group
Site
Article
Distribution chain (Refsite!)
Distribution chain /Price list

Sales Price Calculation : Basics
Vendor
One-step calculation
with a recommended retail price
Purchase (net/gross)
EUR 10,-
Customer
Sale (net)
EUR 19,99
Mark-up: 30%
Cust. disc.: 5%
Mark-up: 10%
VAT: 16%
Price point group: 001
Consumer
Sale (gross)
EUR 19,99

Process Flow Diagram
Retail Pricing
RetailPricingManager–ProfessionalUser
Basis for the sales
price calculation
Display or change
planned markups
Sales price
calculation –
generic article
Sales price
calculation – single
article
Sales price
calculation – sales
set
Enter competitor's
prices in a price
entry list
Site price lists
Calculate sales
prices using
competitor's prices
Execute Retail Pricing Perform Wholesale Calculation
Perform a sales price
calculation with
manual transfer of the
suggested price
Price calculation
for price family
Calculate with
price points
Market – basket
calculation
Perform a sales price
calculation with
automatic transfer of
the suggested price
Basis for the sales
price calculation
Create a customer
– specific discount
(K007)
Customer –
specific markups
and markdowns
Sales price
calculation –
calculation with
price ist
Maintain a vendor
condition at
purchasing level
Retail markup for a
merchandise
category
Price list – specific
markup (AUFS) for
a merchandise
category
Planned markup
(AUFS) for a
merchandise
category
Display or change
planned markups
Individual or list
display for customer –
specific discount
(K007)
Create sales order
Processing the
pricing worklist
Create pricing
document
Change sales price
PB00 for articles
Generate pricing
worklist
Pricing worklist
release

Sale price calculation : selection

Purchasing price determination type

Purchasing price determination –sale set

Purchasing price determination

Purchasing price determination – mixed price

Purchasing price determination - preishable

Sale price determination type

Purchasing price sequence

Sale price determination

Sale price calculation : selection screen

Sale price calculation : display

Sale price calculation : display screen 1

Sale price calculation : control parameter

Sale price calculation : control parameter screen

Sale price calculation : log screen

Sale price calculation : detail screen

Sale price calculation : Saving calculations

Sale price calculation : calculations

One –step calculation

Two-Step Calculation
CoCd: BP01
S.Org.: BP01
03 01
Planaufschlag:
WG/VL
BP01/03
BP01/01
03
01
Vendor
DC
€ 0,90
€ 0,90€ 1,10€ 1,00
€ 1,99 € 1,89€ 1,99
Store 1 Store 2
Consumer Consumer Consumer
Customer

Two-Step Calculation-process-1

Canceling Sales Prices

Pricing point

Price Family
In a price family you establish defined price relationships for a group of articles. To do this, you
specify a master article for each price family to be the lead article in sales price calculation.
Subordinate articles, which are dependent on master articles for sales price determination are
organized into family groups. A family group groups subordinate articles with an identical price
relationship. You also decide on a reference article for a family group. The reference article
represents the family group in certain functions.

Sale price list

Sale price list: calculation

Site price list: price change

Price List Calculation
Screw assortment
Material group: MC14401
Price list P1
Mark-up: 10%
Cust. disc. X
Freight Costs X2
...
End-SP 1
Sales price 1
Price list P2
Mark-up : 20%
Cust. disc. Y
Freight Costs Y2
...
End-SP 2
Sales price 2
Price list P3
Mark-up : 30%
Cust. disc. Z
Freight Costs Z2
...
End-SP 3
Sales price 3

Processing of the pricing work list (1)
Screw assortment
Material group: MC14401
Sales price (old): EUR 9,-
Sales price (new): EUR 10,-
Update of direct entry
Is the change in purchase price-
relevant to costing?
What sales prices resp. calculations
effected?
Layout of the work list
-> Direct entry -> creation of the worklist

Processing of the pricing work list(2)
Release of the pricing worklist
(Review of the calculation proposal)
Accept/change/abolish calculations
Generate pricing work list
BP01/01/01
SP EUR 29,-
BP01/03/01
SP EUR 16,-
BP01/02/01
SP EUR 24,-

Pricing - Checklist
Customer-specified discount
 Arrangement of customer-specified discount
 Pricing in the sales order
Pricing worklist
 Activation of the direct entry for creating the
worklist
 Generation of calculation proposals for the
processing and the release
Sales price calculation
 Single article
 Sales set/generic article
 Price lists

Additional & pricing

Price Planning and Management
The retail price planning and management functions allow you to set optimal pricing
in your retail store and respond to increasing competition, narrowing margins, and
changing customer tastes by:
• Aligning customer demand and business objectives with pricing through
automation at the store and SKU level
• Simplifying dynamic price changes as consumer demand shifts and cut overhead
costs by integrating pricing execution
• Maximizing overall sales and profitability

What Is a Markdown?
A markdown is a reduction of the original price of goods to increase sales. Compared to a sale or
promotional event, a markdown essentially is when you change the list price to a lowered price
permanently. For example, you decide to sell your tennis racket, which is listed at $300, for $250,
therefore taking a $50 markdown. However, you bought the racket a few years ago for $150, so
your initial markup (IMU) is $150 double the cost. This is referred to as keystone pricing. Upon
the sale of your racket, you will not receive a 50 percent gross margin. The new markdown price
will yield a 40 percent margin.
Margins can be expressed in either % or $ and represent the amount of money the retailer
makes as a result of the sale. It is controlled by the initial markup or IMU of the merchandise.
Markup is the difference between the cost of the product and what you sell it for or its market
price. While many items in retail today have much lower margins than "back in the day" the
best scenario is when you can have keystone margins.

Markdown Management
You can monitor the planned vs. actual results in the system on a regular basis to
see how well the strategy is working. You control the markdown plan, so you can
make changes at any time if you see that sales are doing better or more poorly
than expected:
Process:
• Markdown Plans
• Markdown Profile Assignment
• Markdown Rules
• Markdown Types

Markdown Planning: Definition

Markdown Process

Markdown planning: overview
A markdown plan is a specific instance where you want to implement scheduled price
changes for certain merchandise. For example, you have received a shipment of swim
wear and want to schedule markdowns for it through the end of the season.

Markdown Rule
Before you can use the markdown planning function, you must first create one or more
markdown calculation rules. Later you will apply these rules to specific plans or even to
individual articles or merchandise categories.
Markdown rules specify:
• The time interval between markdowns
• The percentage of the original price at which the merchandise is to be sold during
each price phase
• The percentage of total sales you expect to achieve for each price phase

Markdown Rule: Example
Calendar days after
start
% of original sales price % of sales
100 50
60 75 30
90 50 10
120 33.3 5
Day 0 is when the merchandise is originally displayed in the store. Within the first 60 days, you expect that 50%
of your stock will be sold at the full price. At that point you will mark the merchandise down by 25%, so that it
now sells for 75% of its original price; this will contribute another 30% to sales. After another month, you again
mark the price down by 25%, so that now the price is half off the original, and this will bring another 10% in
sales. And so on for the remaining month.
The first line is always reserved for the starting point, which by definition is 100% of the original price. The
system automatically inserts it for you. Your total sales volume need not equal 100%.
To enter a mark up, use a percent that is larger than the previous line (e.g., 110% of original price).
These are generic rules. They do not yet apply to any actual merchandise (you will do that in a subsequent
step). You may want, for example, to have different markdown rules for women’s fashions, school supplies,
Christmas novelties, etc. You can create as many or as few rules as you want.

Activating Markdown Price Phases and Monitoring the Results
Price phases are not in effect until you activate them. You can choose to activate some articles
and not others, or only some price phases for a given article. You can also activate prices either at
the store level, price list level, or the distribution chain level.
Before the sales prices are activated, margins and markups are only calculated from the purchase
price and planned sales price within the Markdown Planning component. When sales prices are
activated, the full Retail calculation program is executed in the background, taking into account all
other conditions that may be applicable, including any price point tables that may exist.

Exception Analysis and Automatic Creation of Markdown Plans
In addition to creating markdown plans manually, you can have the SAP system analyze sales
data and let you know when a markdown is advisable. For example, you can create an exception
report that lists the 100 articles with the lowest sales revenue for the previous month. When the
analysis is run, Workflow will send a work item to the person responsible for markdown planning,
who can then examine the results and determine whether price reductions are warranted. If so,
the system will create the markdown plans automatically.

Markdown Type
After you have created markdown rules, you create markdown types and assign rules to them. You
can include a reference site, reference distribution chain, or reference price list in the markdown
type, in which case the system will be able to suggest sales prices for articles in the markdown plan
based on these references. If you do not enter this organizational data in the markdown type, the
system will try to find the sales price for the distribution chain for the articles you selected. If it does
not find this price, the system will not suggest any markdown sales prices.
Markdown
Type
Markdown
Rule
Sales
Org.
Distribution Channel
005 WF-UP USA R1
006 WF-UP CAN R1
007 WF-DISC-
US
USA DU
008 WF-DISC-
CAN
CAN DC

Markdown: History

Competitor pricing

competitor

Competitor price

Competitor price shopping

Strategy for generating a suggested price from competitor prices in sales price calculation:
The individual elements of a pricing strategy are:
1. Pricing strategy type :
The pricing strategy type defines the fundamental characteristics of a pricing strategy
Examples of pricing strategy types:
• The suggested price should always be lower than the competitor prices.
• The suggested price should always be higher than the competitor prices.
• The suggested price should always be the mean value of the competitor prices.
• Competitor assortment & module
competitor pricing

Competitor Price Entry - Processes
Initialization type
If no competitor price could be determined, the initialization type determines which price is to
be used as the suggested price.
Certain values are given for initialization:
• Zero
• Current final price
• New final price
• Maximum of current and new final price
Termination rule
The termination rule is used to change the suggested price by a certain percentage once all
the competitor prices have been processed. This percentage is maintained in the percentage
field (see below).
• Percentage Rate
• Price point rounding
This indicator rounds the suggested price by an appropriate amount.
Function module
If the control parameters supplied by SAP and described above are not sufficient to fulfil your
particular requirements, you can use a specially-designed function module to create your own
pricing strategy.

Competitor Price Entry - Processes
Adopting Suggested Prices as Sales Prices
You have the following options for adopting the suggested price that was generated using the
competitor prices as your own sales price:
•You can adopt the suggested price manually in the pricing table by using Copy price field to
transfer the price from the Suggested price list field to the Final price list field.
•You can define an appropriate sales price determination sequence in which you specify that
the suggested price is transferred automatically to the Final price list field.

Market Basket calculation

Market Basket Calculation

Market Basket analysis

Market Basket – basic list

Market Basket: scenario

Market-Basket Price Calculation - Processes
This process describes how you perform a market-basket price calculation for a group of articles
and sites. This process allows you to change sales prices, sales and gross margin figures for the
articles in the market-basket, while simulating the effects of these changes on the total gross
revenue from the market-basket.

Pricing Worklist
Sales prices are generally calculated on the basis of the purchase price, which is in turn calculated using the
purchase price calculation schema on the basis of condition types affecting pricing (the basic purchase price,
vendor discount, for example). Other pricing-relevant parameters including the regular vendor indicator in the
purchase info record and the source of supply indicator in the article master data are evaluated in supply source
determination.
If the purchase price or the above parameters for source determination change, it is advisable to check the
existing sales prices with respect to the new margin.
The pricing worklist function allows you to determine all calculations affected by parameter changes

Pricing Worklist: Example
You can make settings for creating pricing documents with document indexes under Pricing type in Customizing
for Pricing. Here, you can choose between:
1.Pricing documents with adjustments for changes in conditions
This document index determines only those calculations affected by a change in purchase price.
2.Pricing documents with adjustments for changes in conditions and master data
With this document index, calculations that are affected by changes to the source of supply parameters are
entered, in addition to those affected by changes in purchase prices.

Pricing soloution in sap retail

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