Guide

The Math of Markdowns

The first markdown is always the cheapest. Hanging onto aging inventory destroys cash flow and OTB capacity.

Retailers hold onto dead stock out of emotional attachment or a desire to "break even." This is a mathematical error. Dead stock occupies physical space (preventing new arrivals) and ties up capital.

The Velocity Rule

If an item has not sold a single unit in 45 days (for apparel) or 90 days (for hardgoods), it is dead. Action must be taken.

  1. Day 45: Move location on floor.
  2. Day 60: 25% Markdown.
  3. Day 90: 50% Markdown.
  4. Day 120: Liquidate / Donate (Write off).

Markdown Budgeting

Markdowns should be planned in your OTB. A healthy business expects a certain percentage of markdowns (e.g., 10-15% of sales) as the cost of having varied, exciting inventory. Zero markdowns means you are buying too conservatively and likely missing top-line sales.

Markdown Impact Calculator