![]() Please do excuse me, I’m a merchandiser after all. Use it to work out if you’d be better off going for a 10% off promotion, or how much discount you can offer on the cactus print bag, all while keeping an eye on your profit.Ī quick word on what might seem like my obsession with profit. You can work all this out with the Flourish Markdown Calculator. Those are both key factors in reducing costs and increasing profits, after all. They will have bought or made extra stock to meet the increased sales demand of the 50% off Black Friday bargain. Maybe they got a lower cost price for the main component, or perhaps making the stock in bulk saved time. Those clever merchandisers have worked out (on their very large calculators) that if they sell more units they can make the same, or even more profit despite the 20% off. You know that ‘20% off EVERYTHING’ event (where you just HAVE to buy everything you'd been saving in your basket for weeks)? Or the Black Friday bargain you spotted with 50% off? All the key events like this are planned in long in advance. That means that by using a promotional markdown of 20% on the first day, you’re £30 better off than if you’d waited and marked them all down to 50% off the next day. 10 Chocolate Roses x £5 Selling Price (£10 - 50%) = £50 sales This reduces the value of your stock to £50 as it is a permanent markdown.Į.g. You’d have permanently marked them all down to 50% off the next day, giving a new permanent markdown price of £5. Number of products sold (10) x Discount Value (£10x20%) = Markdown spend (£20) And your markdown spend was £20, because: So, if you sell all ten roses at £8 you make £80 sales. With promotional markdown, the sales and markdown are only counted when you sell something. Importantly, your stock is still WORTH £100, because the discount is only for one day, and then will go back up to £10. You decide to run a 20% off promotion and sell each rose at £8 instead of £10. You can’t save them for next year, either, so that means marking them down to 50% off tomorrow.Īs you have ten chocolate roses at £10 each, you have £100 of stock (number of products x current selling price = stock value). You have ten left and you know you won’t sell all of them today at full price. It’s the 14th February, Valentine’s Day, and you’re selling £10 chocolate roses. Which means you have more sales and more profit. So when you get to the sale, you will have fewer units to mark down permanently, at a higher discount. But what if you could minimise the impact on your profit? By using promotional markdown BEFORE the Mid-Season sale, you can sell some units at a lower discount. It will definitely have to go into the Mid-Season sale at 50% off. Imagine that cactus print bag that isn’t selling. Minimising the impact of an under-performing product Because it isn’t permanent, you can use it more strategically to minimise the impact an under-performing product has on your profit, or to maximise your overall profit. Unlike permanent markdown, promotional markdown is your flexible markdown friend. It’s a kind of retail detox, clearing out the old to bring in the new. If there’s a little bit left over (or *whispers* you don’t get it right and that to-die-for cactus print bag doesn’t sell as you expected) then that is what you'll find in the End of Season and Mid-Season sales. Based on that, they will buy or make enough of the product to meet the sales demand (learn more about range planning). Retailers plan these key events (find out more about retail marketing calendars) and they also plan the lifecycle for each product, when to launch, sell and clear it. Those ones which always appear at the end of summer, Christmas and then a couple in between. Think end of season and mid-season sales. ![]() Once you’ve marked the price down, it doesn’t come back up, so you use it when you’re intending to sell all of the stock you have left. Permanent markdown does what it says on the tin. Let’s being our guide to markdown by taking a closer look at those two types of reduction permanent and promotional. ![]() But while reducing prices is easy, reducing prices in a way that stays profitable is more of an art – and a bit of a science. We all reduce prices at some point in our businesses, whether that’s with a view to making space for new stock by clearing products that aren’t selling, or to strategically drive sales.
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