Question 1

When should I mark down slow inventory?

Accepted Answer

Early and shallow beats late and deep. Most retail calendars take a first markdown of 15 to 25 percent at 8 to 16 weeks of age, a second cut around 40 percent by 26 weeks, and clear anything older at whatever the market pays. Waiting costs carrying expense and the shelf slot a better product wanted.

Question 2

Do markdowns lose money?

Accepted Answer

Compared to the invoice, sometimes. Compared to holding, usually not: the purchase cost is sunk, and the real comparison is cash recovered by clearing now versus slow sales plus carrying cost plus eventual salvage. Run that comparison and markdowns usually win earlier than instinct says.

Question 3

What is a typical carrying cost for inventory?

Accepted Answer

Between 15 and 30 percent of inventory value per year once storage, insurance, shrink, obsolescence, and the cost of the tied-up cash are counted. That is roughly 1.5 to 2.5 percent per month draining from every unit that does not move.

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