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How Much of a Markdown Do I Take?
Thu, Dec 03, 2015 at 9:55AM

Once you know when to take a markdown, you have another big question to ask yourself: How much of a markdown do I take?

We understand the dilemma. You want your old, flawed or otherwise unpopular merchandise to sell and need a competitive price to do that—but you also don’t want to “give away” your money by marking down items too low.

In today’s blog, we will be discussing a few tips to keep in mind when deciding how much of a markdown to take on items in your store. While every case is different, these rules should be able to give you a general idea about how to maximize your markdowns.

Have a plan.

The most important thing you can do to take successful, cost effective markdowns is to have a plan in place. Because no retail buyer can be right 100 percent of the time when it comes to picking out items to sell, it’s helpful to expect to be wrong at least 20 percent of the time.

Of course, that doesn’t mean accepting defeat! Expecting and predicting potential failures can allow you to prepare your markdowns accordingly—so you never have to be surprised or unprepared when an item won’t sell. By doing this, you will be able to keep items moving, thus taking in more profits… and you’ll never have to crowd your shop with seasons-old merchandise!

The first markdown is the cheapest.

When deciding how much of a markdown to take, remember that the first markdown is always the cheapest. In other words, a large enough markdown taken right away can eliminate the need for future markdowns and can help you move items out the door quickly, allowing you to recoup your costs and then some.

Because a good initial markdown is so important, anything less than 25 percent isn’t typically worth doing. Instead, aim for bigger markdowns (that are more attractive to customers) and go higher if necessary—up to 40 or 50 percent—to get rid of the item quickly.

Keep in mind that the point of a markdown is to free up space (and funds) for more popular, lucrative items, so there’s generally no point in opting for very low markdowns that won’t influence customers (or will take several “cycles” of markdowns to actually sell).

Matching a method to your markdown

Once you’ve decided on a markdown, you may be wondering how to present it to customers. While a simple “25 percent off” will work in most cases, there are other ways that may work better for your specific business. For example, if you apply a 50 percent markdown to a group of items that all cost 20 dollars originally, you can promote this markdown by setting up a 10-dollar table. This is just one creative way to advertise your marked down prices—find one that works for you!

Knowing how much to markdown isn’t always easy, but we hope that these tips allow you to make the most out of your next markdown!

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