Retail & CX metrics glossary
A markdown is the permanent price cut that clears what didn't sell. Here is the math of timing it — and what it pays for.
A markdown is a permanent reduction of the selling price, taken to clear inventory that is not selling fast enough at the current ticket — end of season, a fashion miss, excess depth, a discontinued line. It is not a promotion: a promotion is a temporary price with a planned return to full price, designed to stimulate demand; a markdown is a one-way repricing that admits the original price will never sell this stock. The distinction matters because they are managed with different math, different budgets and different P&L lines.
Markdowns are also one of the largest silent costs in retail — routinely several points of revenue in fashion — and the cost is driven less by whether you mark down than by when. This page covers the formula and a working calculator, the early-and-shallow versus late-and-deep math, the standard markdown cadence with its sell-through triggers, and the uncomfortable question underneath the whole discipline: how much of what "didn't sell at full price" was actually never offered to anyone.
Markdown (retail)
Markdown (%) = ((original price − new price) ÷ original price) × 100
original price = the full selling price before the reduction · new price = the permanent new selling price after the cut
Markdown calculator
A jacket launched at $129.90 has sold through only 22% of units six weeks into a twelve-week season — well under the pace needed to clear. The buyer takes the first markdown to $89.90: (129.90 − 89.90) ÷ 129.90 × 100 = 30.8%. Taken now, 30% is likely enough to reaccelerate the curve; taken four weeks later, the same stock would probably need 50% or more to clear before the season closes.
Typical markdown cadence and depth
Depth conventions in fashion and seasonal retail follow a ladder — each step triggered by the sell-through curve falling behind plan, not by the calendar alone:
| First markdown | 20–30% off original price |
|---|---|
| Second markdown | 40–50% off original price |
| End-of-season clearance | 60–70% off original price |
| Full-price sell-through target (fashion) | 60–75% of the collection sold before any markdown |
Ranges reflect common practice in fashion and seasonal retail, not a rule — the right ladder depends on category, margin structure and how fast the season decays. Grocery and hardline cadences differ substantially.
Early and shallow beats late and deep
The core math of markdown timing is that demand for seasonal product decays with the season. A slow style marked 25% in week five still meets most of the season's remaining customers, at a price that still carries margin. The same style held at full price until week ten meets a fraction of that audience — and now needs 50% or 60% off to clear against the incoming collection. Every week of delay does two things at once: it burns selling weeks the discount can no longer use, and it deepens the cut required to move the same units.
This is why disciplined retailers treat the first markdown as a pace decision, not a defeat. The comparison is never "25% off versus full price" — the full price was not selling. The real comparison is 25% now versus 55% later plus the working capital cost of carrying the stock in between. Hope is the most expensive pricing strategy in the building: the merchant who waits for the slow style to "pick up" almost always ends up paying for the wait at clearance depth.
The markdown cadence — and the sell-through trigger
In practice, markdowns run as a ladder: a first cut of 20–30%, a second of 40–50% for what the first did not move, and a final clearance at 60–70% to hand the space to the next season. Each step should be triggered by the sell-through curve, not by a fixed date: if the plan says a style must reach 40% sell-through by mid-season and it is tracking at 25%, the trigger has fired — regardless of what the calendar says. Styles on pace earn the right to stay at full price; styles behind pace go into the ladder while the discount can still be shallow.
Two disciplines keep the ladder honest. First, mark down by item and store, not across the board: peanut-butter markdowns give margin away on winners to subsidize indecision about losers. Second, close the loop into buying — recurring markdown pressure in a category is the truest signal the merchant plan has: it says the buy was too deep, too early, or wrong for that audience, and it says it with money.
The blind spot: part of what "didn't sell" was never offered
The markdown ledger treats every unit that failed to sell at full price as a pricing or product problem. But in assisted retail, a third cause hides inside that number: execution. A style the team does not know, does not like, or simply never pulls from the rack does not fail at the price — it fails at the conversation. The customer never saw it, or saw it and raised an objection nobody answered. At the end of the season, that unit is indistinguishable in the data from a genuine product miss, and it gets the same 60% cut.
This is the most expensive confusion in the markdown budget, because the fix is completely different. A true product miss should be marked early and bought differently next season. A style that never entered the conversation needs the conversation fixed — and marking it down teaches the buying team exactly the wrong lesson about what the customer rejected. Before cutting the ticket, the question worth asking is one the inventory system cannot answer: was this item actually offered, and what happened when it was?
Markdown is the tax on what the conversation didn't sell.
Cognifyze captures the in-person sales interaction itself — with consent, without identifying any individual shopper — and shows which products actually enter the conversation: what gets offered and what never leaves the rack, which objections kill the full-price sale and which arguments close it. Before the buyer cuts the ticket, merchandising finally knows whether the problem was the price — or the fact that nobody ever presented the item.
In measured deployments, making the interaction visible moved same-store conversion from 51.5% to 79.5% (+28pp, p<0.001), with 383% ROI and payback in 1.4 months.
Find out what your markdowns are really paying for — book an executive diagnostic.
Related metrics and guides
Markdown — frequently asked questions
What is a markdown in retail?
A markdown is a permanent reduction in an item's selling price, taken to clear inventory that will not sell through at the current price — typically for end of season, slow sellers, excess stock or discontinued lines. Depth is expressed as a percentage of the original price.
What is the difference between a markdown and a promotion?
A promotion is temporary: the price drops for a defined window and returns to full price, to stimulate demand. A markdown is permanent: the price is repriced downward for good, because the stock will not clear at the original ticket. They sit in different budgets and send different signals — a promotion is marketing, a markdown is an inventory correction.
When should the first markdown be taken?
When the sell-through curve falls behind plan — not when the calendar says the season is over. If a style needs 40% sell-through by mid-season and is tracking at 25%, act then: an early 25% cut usually clears what a late 50% cut struggles to, because it still meets the season's remaining traffic.
How deep should each markdown be?
The common ladder is 20–30% for the first cut, 40–50% for the second, and 60–70% at final clearance. Each step should be big enough to visibly reaccelerate the sell-through curve — a timid 10% cut often burns selling weeks without moving the pace, which is the worst of both worlds.
How do I reduce markdowns without slowing sales?
Three levers, in order: buy shallower and react in season instead of betting the full depth upfront; trigger markdowns earlier off the sell-through curve so cuts stay shallow; and fix the sales conversation — items that never get offered generate markdowns no pricing strategy can prevent, because the problem was never the price.