What is a markdown in fashion retail?
A permanent reduction of a product's selling price, usually to clear slow-moving or end-of-season stock.
In short
A markdown is a permanent reduction of a product's selling price, usually to clear slow-moving or end-of-season stock. It turns unsold inventory into revenue but reduces the margin earned on each item.
How does it work in practice?
Merchandisers review sell-through and weeks of cover regularly. When a style sells too slowly to clear by the end of its selling period, they reduce its price, sometimes in several steps. Markdowns differ from temporary promotions because the price does not return to the original level. In wholesale, brands sometimes contribute to a key account's markdown cost through markdown support, credit notes or returns.
Why does it matter?
Markdowns are a normal part of fashion retail because demand for seasonal products is uncertain. Used well, they free cash and floor space for new stock. Used badly, they erode margins, train customers to wait for sales and damage brand positioning. The level of markdowns is a strong indicator of buying accuracy, and it shapes negotiations between brands and retailers about terms and future orders.
How is AI changing it?
AI-based markdown optimisation predicts how demand responds to price changes for each product and location. It recommends the right timing and depth of each reduction to maximise revenue while clearing stock by a target date. Models can also show which products should be moved between stores or channels instead of marked down.
Common pitfalls
- Marking down too late, when the remaining selling time is too short.
- Applying blanket reductions instead of targeting specific styles and sizes.
- Ignoring the impact of frequent markdowns on brand perception.
- Not feeding markdown results back into future buying decisions.
Frequently asked questions
What is the difference between a markdown and a discount?
A markdown permanently lowers the selling price of a product. A discount or promotion is usually temporary and applies for a limited time or to specific customers.
What is markdown support in wholesale?
Markdown support is when a brand compensates a retailer for part of the margin lost through price reductions, often for key accounts or slow-selling styles.
