fbpx Markdowns. No store wants them, but every store has them. Many stores would consider this the dirty little word of the retail industry. But in reality, markdowns are a HEALTHY part of doing business. The truth is, cash flow is dependent on an effective markdown strategy and all good retailers are in the business of marking down old, low-selling inventory to make room for new inventory that will sell. But how do you do it? Read on for some markdown best practices!

Identify the shelf life of products.              

Before you can effectively markdown products, you need to understand the shelf life of them. Is it 60 days? Is it 90? You need to understand a realistic life of your products in order to identify how long to keep a product before moving it to clearance. Review your past year’s data, look at your top and middle selling products. Decipher a drop-off date that takes these best sellers from profitable to not.

Set up a markdown schedule for your store.

Once you understand how long you should keep a product, you can start to automate the markdown process. Set up a schedule in RICS to automatically markdown items that have hit their shelf life date. The most important part of the schedule is sticking to it. Once you identify how to move products that have sat for too long, don’t change your mind and try to hold on to them. That will only end up costing you money rather than making you money!

Create a pricing markdown strategy.

Once you know when you’re going to markdown your products, you need to decide by how much. Avoid keeping items for even longer by doing a slight markdown. If you markdown products by 40% immediately, it will increase the likelihood of quick purchase, while still helping you make some money on it. As a retailer, you know your products and customers best. In order to implement an effective markdown strategy, you have to keep both of those things in mind. Identify the process that works best for you! But remember that moving out items that aren’t selling can help you make room for the new inventory that will make you money. To learn more about how you can increase your cash flow quickly, download our free guide Cash Flow: How to Make More Now today!