Effective Permanent and Point-of-Sale Markdowns
Ten Markdown Tips -The How, What, When, Where, and Why of Markdowns
Fact: You can minimize markdowns, but you won’t eliminate them.
Taking markdowns is just a fact of doing business. Here are some retail markdown tips so you can learn how to take markdowns wisely and minimize their impact on your retail store.If you don’t take markdowns on merchandise that’s not selling, you’re simply tying up cash that could otherwise be spent on saleable goods. Trust me, holding on to bad merchandise and hoping it will eventually sell at full price just doesn’t work.
There are two kinds of markdowns to consider. The first kind is a permanent markdown. This is the markdown you take on merchandise you want to clear out of your store forever and aren’t going to re-buy. You know, that talking flamingo with the bouncing head that the rep talked you into, or the “darling” little chartreuse bonnets your Mom picked out. Mark the lower price in red (or another bright color) on the price tag. And keep lowering the price until it’s gone! This is the stuff that should be in the clearance section of your store.
The second type of markdown to consider is the point of sale markdown. Use this kind of markdown when you want to put items on sale that you intend to keep selling in your store. With this kind of markdown you don’t permanently lower the price, the special price is only for a specific period of time – like a weekend sale or a month long special event. The price tag stays the same and the markdown is taken at the time the sale is rung up. When the sale is over, the merchandise goes back to its original price. You might use the point of sale markdown if you are temporarily overstocked in an item (umbrellas during a drought or sleds in a mild winter) or if you are having a special retail promotion.
10 Retail Markdown Tips for Making the Most of Your Markdowns
- JUST DO IT! Markdown the “dogs” in season.
Don’t wait to mark down something that you know isn’t going to sell at full retail – especially if it’s a seasonal item. Marking it down in season allows you to take a smaller percent off than if you wait too long and it’s also more likely that you’ll end up actually selling the goods than if the season has passed.
- Pick a percentage that motivates buying.
If it’s a bad buy, don’t try to get away with a 5% markdown. Start at least 20% off and go down from there if necessary.
- Don’t overdo the “SALE” mode. Twice a year is plenty.
If you’re always “on sale” your customers will hesitate to buy from you at regular price. Try to keep big, storewide sales to twice a year at most.
- Move permanent markdowns to a clearance area.
If you leave permanently marked down merchandise mixed in with regular price retail goods, it’s hard to spot the great deals. Move all your clearance to one area so it’s easy to shop.
- Sign, sign, sign.
Make sure you’ve got signs highlighting all your markdowns. A big sign for the clearance area and signs to indicate your point of sale markdown (All Games 40% OFF) are the best way to make sure your customers know what’s on sale.
- Try a price point table.
If you have lots of items at around the same price point, try a price point table – for example, "All Items On This Table $10." That might mean a 22% markdown on some items but a 48% markdown on others. It makes the buying decision easy for your customers, and that moves merchandise.
- Put your markdowns at the “back of the bus.”
If you put your clearance section at the back of the store, you’ll minimize the clutter in your store (because, let’s face it, clearance isn’t very pretty!) and you’ll also make customers walk through all the wonderful regular priced merchandise to get to the bargains!
- Train your sales staff.
Take time to thoroughly train your retail sales staff on great selling behaviors. Encourage them to sell regular price merchandise. This will mean fewer markdowns for you and higher overall margins.
- Broken colors, sizes, or assortments equal markdowns.
When exactly the right time to mark something down is a tricky question. Here’s one rule of thumb: if you have a coordinated merchandise group that has hardly any matching sizes, colors, or pieces left, mark it down.
- Over a year old? Dump it or donate it.
Your store is not a museum. If you’ve got basic merchandise that’s over a year old take a loss on it or donate it to a charity and get the write off on your taxes. There’s some stuff that just won’t sell no matter how low you mark it!
If you need help with your Inventory Management and Assortment Planning, or want more retail markdown tips check out the great resources available in the Retail Mastery System. It is the most comprehensive, business-building resource ever assembled for the independent retailer.
Wishing you great sales and lots of fun,