Philip Mountford spent 15 years as CEO of Hunkemöller, building the lingerie brand into a major European player. Today he chairs five fashion businesses and sits on the board of four more, including a role as senior advisor to Etam, a €1.3 billion lingerie and ladies fashion retailer. We spoke with him about why the economic model that governed fashion markdowns for decades stopped working, and what that means for retailers trying to protect margin today.
Philip: Quite straightforward, you placed your order and had your items shipped from Shanghai. It took 28 days for them to get to Rotterdam. Stock arrived in your stores. You had at least 30 days with that stock in stores before you had to pay your supplier.
During those 30 days, you're selling at full price. Normally you're looking for about 5% to 10% full price sell-through per week. So by week four, you've sold 25% plus of the stock. Most people work on five to six money multiples. You buy something for one, you sell it for five or six. So that 25% you've sold has generated enough revenue to cover the cost price. You hadn't got the profit yet, but you've got your money to pay the supplier.
Then over the full season, if you ask a retailer what they were looking for, they'd say 70% to 75% full price sales. The remaining 25% to 30% you'd markdown to clear. You'd aim for 95% total sell-through by the end of the season, with 5% going to outlets or alike.
That was the system, and It worked because payment timing aligned with revenue. You had cash in hand before the bill came due.
Philip: Well, six years ago, nobody talked about logistics on water. Never came up at a board meeting. I can't even remember talking about it at senior management meetings. It was literally a topic that nobody talked about.
Then you had COVID, and then the Suez Canal crisis, and shipping became the single most disruptive force in fashion retail.
Shipping from Shanghai to Rotterdam used to take 28 days. Today it takes 67 days at best. Container costs, which sat at roughly $1,500 pre-COVID, hit $30,000 during the pandemic peak, and now trade at $5000 per the Iran war. The Suez Canal closure forced rerouting around Africa, adding 35 to 37 days for most shipments. It's basically taking 30 days out of most retailer's ability to sell that product.
Philip: Yes, completely broken. Now you're paying the supplier seven days before the product has even got into a shop. Losing these 30 days in the logistics cycle is causing huge cash flow issues. In some cases retailers are paying for goods before they have sold a single item.
Products spend a month longer in transit, which means fashion trends can shift before goods land. Lead times stretch so far that buyers are placing orders 13 months ahead, possibly missing the mark on color, silhouette, or mood.
And with less selling time once a product finally arrives, the window to achieve full price sell-through compresses. That makes price and markdown precision more crucial than ever.
Why are companies going into Chapter 11? Basically cashflow. Nothing else.
Philip: There are more fashion retailers with 50% full price sell-through now than there were pre-COVID where 70%, 75% was the standard. A retailer moving from 70% to 50% hasn't just lost 20 percentage points. They've fundamentally altered the economics of every collection. Half the assortment now requires some sort of discount to move.
The old model was: optimize discounts on the last 25% to 30% of inventory. Now you're trying to optimize on 50%. The math doesn't work the same way.
Philip: When you get to senior merchandisers, each is through experience convinced they know the best price to sell a product at. But you've got to be extremely careful.
There's a new wave of pricing tools in fashion retail now, tools built specifically to help with the challenging numbers game of setting markdowns. At one of the companies I work with, we used one of these markdown tools in half the shops and the senior merchandise team in the other half. The tool beat them by 200 basis points every single week for seven weeks straight. This was a relatively nimble system, not one of the big enterprise platforms, which demonstrated its clear impact.
Another example. Something happened recently where the whole team disagreed with an aggressive discount the system recommended. They overrode it and put it back to a higher price. The product didn't sell. The system said this should be reduced by 80%. We reduced it by 50%, didn't clear enough stock, and at the end, the stock we've got we probably won't even be able to give away.
It shows us we need to learn to trust these new systems. Sometimes you have to take your hands off the steering wheel if you've got an almost self-driven car.
Philip: You've got to be very careful. You cannot apply algorithms in the discount sector in the same way as in the premium. You might actually destroy brand equity.
One of businesses is a beautiful brand where we approach markdowns meticulously. We would not markdown as heavily. It’s all about the right price the consumer is prepared to pay. With the premium brand, at a certain threshold, it's a brand destroyer.
But let's be clear: such an algorithm-driven tool is only clearing up a mess created earlier in the chain. The only reason we markdown is because we bought the wrong product, bought too much, or allocated it to the wrong stores. You just need to be careful how you clean up.
Philip: Previously lots of CEOs, myself included, wanted a system that controlled everything from planning, over allocation, replenishment and markdown management.
Now people are looking at task-specific tools in those four areas. Mostly still with SAP or Microsoft as the data layer, because data integrity/ERP system are critical. But then putting nimble, agile tools on top, taking that data and making it quicker and easier to understand.
A lot of the CEOs I work with are in their late thirties, early forties. Less inhibited by big brands, more tech-savvy than the outgoing generation. When you take on one of the big enterprise platforms as your tool provider, it's a huge investment, it's a marriage. When you come out of it, it's a divorce. With smaller agile tools, you can move more swiftly.
Philip: You need to be so much more precise on planning, allocation, markdown management. That's where you simply give away money by being too aggressive or not aggressive enough.
Especially with the current pressure on tariffs, costs, raw materials, etc. Consumers aren't prepared to pay more. So you've got pressure on both sides. For the first time in a long period, we've got compressed margin. The old playbook of absorbing costs through scale no longer works.
Markdown management used to be about optimizing the tail end of your assortment, that is getting the best margin on that last 25% to 30%.
Now you're trying to protect cash and margin on 50% of your inventory in a compressed window while in some cases paying suppliers before you've sold anything.
So this whole new fashion retail reality makes markdown precision more crucial than ever. You simply can't afford to get it wrong anymore. That's the crucial difference.
Markmi - April 2026