Pricing Solution in SAP Retail

Jalil Mousavi
linkedin.com/in/jalil-mousavi-b1564756
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

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Article : Article Category

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Sale set

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Display

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Prepack

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Article : Process

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Merchandise category

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Merchandise Category Hierarchy

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Merchandise category & Merchandise Category Hierarchy

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Site Grouping

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VSR(Vendor Subrange)

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Purchase price conditions

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Purchase price conditions

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Condition type

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Time-Dependent condition

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Header condition, Group condition, Item condition

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Header condition

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Group

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Condition record

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Calculation schema

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Access sequence

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Sale price calculation : Basic function

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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

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Sales Price Calculation: Basics

MM Conditions

Sales price

Margin resp.
actual mark-up

SD Conditions

Sales price

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Sales Price Calculation : Basics

Data retention level

Level, on which gen. conditions (price, mark-ups, discount,
taxes etc.) can be saved.

Distribution chain (Refsite!)

Distribution chain /Price list

Site group

Site

Article

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Sales Price Calculation : Basics

One-step calculation
with a recommended retail price

Vendor Customer Consumer

Purchase (net/gross) Sale (net) Sale (gross)

EUR 10,- EUR 19,99 EUR 19,99

Mark-up: 30%
Cust. disc.: 5%

Mark-up: 10%
VAT: 16%
Price point group: 001

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 Process Flow Diagram
Retail Pricing

Execute Retail Pricing Perform Wholesale Calculation

Basis for the sales Price calculation Basis for the sales Pricing worklist
price calculation for price family price calculation release
Display or change Display or change Generate pricing
planned markups planned markups worklist
Sales price
calculation – single Planned markup Change sales price
article (AUFS) for a PB00 for articles
merchandise
category
Sales price
calculation –
generic article
Price list – specific Create pricing
markup (AUFS) for document
a merchandise
Sales price category
calculation – sales
set
Site price lists Retail markup for a Processing the
merchandise pricing worklist
category
Calculate sales Calculate with Maintain a vendor Create sales order
prices using price points condition at
competitor's prices purchasing level
Enter competitor's Market – basket Sales price Individual or list
prices in a price calculation calculation – display for customer –
entry list calculation with specific discount
price ist (K007)
Perform a sales price Perform a sales price
calculation with calculation with Customer – Create a customer
il Pricing Manager – Professional User

manual transfer of the automatic transfer of specific markups

suggested price the suggested price – specific discount
and markdowns (K007)

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Sale price calculation : selection

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Purchasing price determination type

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Purchasing price determination –sale set

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Purchasing price determination

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 Purchasing price determination – mixed price

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Purchasing price determination - preishable

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Sale price determination type

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Purchasing price sequence

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Sale price determination

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 Sale price calculation : selection screen
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Sale price calculation : display

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Sale price calculation : display screen 1

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Sale price calculation : display screen 2
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Sale price calculation : display screen 3
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Sale price calculation : control parameter

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Sale price calculation : control parameter screen
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Sale price calculation : log screen
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Sale price calculation : detail screen
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Sale price calculation : Saving calculations

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Sale price calculation : calculations

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One –step calculation

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Two-Step Calculation

CoCd: BP01 Planaufschlag:

WG/VL
S.Org.: BP01 Vendor
BP01/03
€ 0,90
03 01
BP01/01

03 DC
€ 1,00 € 1,10 € 0,90

Store 1 Store 2 Customer

€ 1,99 € 1,99 € 1,89

01 Consumer Consumer Consumer

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Two-Step Calculation-process-1

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Two-Step Calculation-process-2

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Two-Step Calculation-process-3

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Canceling Sales Prices

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Pricing point

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 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.

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Sale price list

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Sale price list: calculation

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Site price list: price change

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Price List Calculation

Screw assortment
Material group: MC14401

Price list P1 Price list P2 Price list P3

Mark-up: 10% Mark-up : 20% Mark-up : 30%

Sales price Sales price 2 Sales price 3

Cust. disc. X Cust. disc. Y Cust. disc. Z

Freight Costs X2 Freight Costs Y2 Freight Costs Z2
... ... ...
End-SP 1 End-SP 2 End-SP 3

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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?

Layout of the work list

-> Direct entry ->
creation of the worklist
What sales prices resp. calculations
effected?
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Processing of the pricing work list(2)

Generate pricing work list

Release of the pricing worklist

(Review of the calculation proposal)
Accept/change/abolish calculations

BP01/01/01 BP01/03/01 BP01/02/01

SP EUR 29,- SP EUR 16,- SP EUR 24,-

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Pricing - Checklist

Sales price calculation

 Single article
 Sales set/generic article
 Price lists

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

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Additional & pricing

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Additional & pricing

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 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

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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.

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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

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Markdown Planning: Definition

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Markdown Process

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 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.

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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

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 Markdown Rule: Example

Calendar days after % of original sales price % of sales

start
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.

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 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.

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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.

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 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.
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Markdown Markdown Sales Distribution Channel

Type Rule Org.
005 WF-UP USA R1
006 WF-UP CAN R1
007 WF-DISC- USA DU
US
008 WF-DISC- CAN DC
CAN

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Markdown: History

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Competitor pricing

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competitor

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Competitor price

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Competitor price shopping

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 competitor pricing

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

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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.
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 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.

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Market Basket calculation

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Market Basket Calculation

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Market Basket analysis

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Market Basket – basic list

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Market Basket: scenario

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 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.

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 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
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 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, inor addition
P SE an SAP affiliateto those
company. affected
All rights reserved.by changes in purchase prices.

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