Inventory Liquidation Optimizer
Calculate the optimal markdown path to clear excess stock by a specific deadline while maximizing remaining revenue.
Inventory Parameters
Cost to store current stock per week.
Depletion Curve vs Price Path
Clearance Trajectory
Balancing speed vs margin.
The Cross-Over
Look where the inventory lines cross zero. The Aggressive strategy clears stock faster (Week 4-5) but at a lower average price.
Revenue Recovery
Calculate (Avg Price x Units). Often, selling 100% of units at $30 is better than selling 50% of units at $50 and dumping the rest.
Holding Risk
The area under the inventory curve represents your holding risk. Minimizing this area frees up capital.
Execution Steps
Enter your current 'Inventory Level' (Units).
Set the 'Weeks to Clear' (Deadline).
Define 'Current Price' and 'Floor Price' (Minimum you can accept).
The chart compares a 'Linear' markdown strategy vs an 'Aggressive' clearance strategy.
Pro Strategy
- If you have high holding costs, the 'Aggressive' strategy (Red Line) is usually better. Cut deep and early to free up space.
- Don't trickle discounts (10%, then 15%). It teaches customers to wait. A single 30% cut often generates more revenue than slow erosion.
- Use 'Mystery Boxes' or Bundles to clear inventory without publicly showing a low price (protecting brand equity).
Core Concepts
Opportunity Cost
Money tied up in dead stock cannot be used to buy new, profitable inventory. Clearing it releases cash flow.
Holding Costs
The cost to store inventory (warehousing, insurance, depreciation). Long clearance cycles increase this cost.
Price Elasticity at Clearance
Customers expect deep discounts for end-of-life products. Small discounts often fail to move the needle.
What is Inventory Liquidation Optimizer?
This tool simulates inventory depletion based on price elasticity assumptions. It compares two common markdown curves: Linear (constant price reduction) and Exponential (aggressive early reduction). It helps visualize the trade-off between margin preservation and inventory velocity.
Best For
- • End of Season sales planning.
- • Clearing space for new product launches.
- • Recovering cash from slow-moving SKUs.
Limitations
- • Assumes demand increases as price decreases (standard elasticity).
- • Does not account for competitor reactions.
- • Simplified holding cost calculation.
Alternative Methods
Dynamic Pricing
Real-time automated adjustments based on daily sales velocity.
Outlet Channels
Moving stock to a discount channel (TJ Maxx, eBay) to protect main brand pricing.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
Fashion Retailer
Winter coats were still in stock in March.
Modeled a 50% immediate cut vs 10% weekly cuts.
Electronics Distributor
New model launching in 4 weeks. Old model stuck.
Used aggressive pricing to clear the channel before the new launch.