Markdown Optimization Engine
Calculate the optimal discount cadence to clear excess inventory by a specific date while maximizing revenue recovery.
Clearance Parameters
Avg Price: $58.18
Depletion & Discount Curve
Clearance Strategy
Recovery: $20,480
Average Selling Price
You are clearing stock at an average of $58.18 (42% avg discount).
Clearance Velocity
Stock reaches zero at End of Period.
Margin Impact
At this recovery rate, your gross margin drops from 60% to 31%.
Execution Steps
Enter your 'Initial Stock' and 'Base Price'.
Set the 'Weeks to Clear' (Deadline).
Adjust 'Price Elasticity' (How much does demand spike when you discount?).
The model generates a progressive discount schedule to maximize sell-through.
Pro Strategy
- Don't wait too long. The first markdown is the most effective. 'Early and shallow' (20% off) is better than 'Late and deep' (70% off).
- Group markdowns visually. A '50% Off Rack' moves product faster than scattered sale tags because it creates a destination for bargain hunters.
- Use 'Hard Markdowns' (permanent price changes) for end-of-life products to clear the SKU from your system.
Core Concepts
Sell-Through Rate
The percentage of inventory sold within a specific period relative to the amount received. High sell-through at full price is the goal; markdowns fix low sell-through.
Price Elasticity of Clearance
Clearance shoppers are highly price-sensitive. Elasticity is typically much higher (-2.0 to -4.0) during end-of-season sales than normal trading.
Revenue Recovery
The total cash generated from liquidating stock. Often the goal isn't profit, but recovering working capital to buy new, better-selling inventory.
What is Markdown Optimization Engine?
This tool simulates a 'Progressive Markdown' strategy. It assumes that to maintain sales velocity as inventory quality decreases (broken sizes/colors), the discount must deepen over time. It balances the urgency to clear (Time) against margin preservation (Price).
Best For
- • End of Season planning.
- • Clearing space for new arrivals.
- • Liquidating a discontinued product line.
Limitations
- • Assumes linear elasticity response.
- • Does not optimize for specific size availability.
- • Ignores competitor concurrent sales.
Alternative Methods
Dynamic Pricing
Algorithmic adjustments in real-time based on demand.
Inventory Optimizer
Comparing holding costs vs clearance speed.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
Fast Fashion Retailer
Winter coats left in March.
Implemented a '3-Step Drop' (30% -> 50% -> 70%) over 6 weeks.
Electronics
Old model vs New model launch.
Marked down old model aggressively 4 weeks BEFORE launch.