A markdown is a permanent or semi-permanent reduction in a product's selling price from its original retail price. Unlike temporary promotions or sales, markdowns typically signal that a product is being cleared out and won't return to its original price.
Markdown strategy significantly impacts profitability. Taking markdowns too early leaves money on the table; waiting too long results in deeper discounts needed to move aging inventory. Sophisticated retailers use data models to optimize markdown timing and depth by category and product.
Tracking markdown patterns across competitors reveals their inventory health and pricing discipline. Brands that rarely markdown maintain pricing power and brand equity. Those with frequent, deep markdowns may struggle with demand forecasting or have a promotional business model baked into their pricing structure.