Calculate retail markdown for products
Marking down is discounting your selling price. Slow moving stock takes up valuable space in your store or warehouse, which means there’s less room for other stock that may be in more demand. Marking down your slow moving stock hopefully moves that stock off your shelves.
You can calculate a percentage markdown for your stock and then use this percentage in your advertising, eg. “25% discount on selected items”.
You need to ensure that you do not make a loss by marking down too heavily. An example of how to calculate the markdown follows:
Following on from Paul’s example where he is selling his product for $60 we will now look at how he can determine what his markdown should be.
To determine the markdown, Paul first needs to find the difference between the current selling price and the decreased selling price. He then calculates the markdown using both the difference and selling price in his calculation.
Assume: Currently his per unit selling price is $60; and he wishes to sell his slow moving stock for $45 (which is still above his COGS).
The calculation is:
- Find the difference
- Determine the markdown
Difference = current selling price per unit - decreased selling price per unit
$60 - $45 = $15
Paul could then have a sale advertising 25% discount on his slow moving stock.
For what other reasons would a business markdown their product?
Post your thoughts to the Comments area and compare answers with other learners.
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