As product assortments age or performance declines, retailers often need to exit older or underperforming products to free up resources for new opportunities. Markdowns and discounts are a common strategies for driving additional demand through price adjustments, while also balancing sell-through and margin targets. Toolio's markdown planning solution enables retailers to strategically plan markdown cadences and gain insights into the financial impact, as well as projected sell-through and margin outcomes.

It is important to understand the difference between markdown and discount when considering the strategy to use. A markdown is a price change at the SKU level that affects all metrics and will devalue your inventory at Retail. Whereas Discounts are promotions, that are only accounted for at the point of purchase. They are temporary and can be blanketed across categories and on top of Markdowns.

Identifying products for markdowns can be influenced by various factors. However, calculated sell-through rates provide clear insights into where a product is likely to end up, based on current and projected demand forecasts. Using this information, users can define a markdown cadence by selecting markdown attributes within the assortment line planning screen.

Markdown cadence is divided into three stages: First Markdown, Second Markdown, and Clearance Markdown. Users are not required to set each cadence, as the First Markdown will automatically extend to the product’s end date unless a Second or Clearance Markdown is added. Once a product is marked down, it cannot return to its regular price.

The following settings are available for each markdown cadence:

When the First Markdown cadence is set, the remaining lifecycle of the product—between the markdown date and the product’s end date—will be considered as markdown sales. Inventory retail value is devalued accordingly.

Example:

A markdown is applied in Week 51. As a result of the expected lift, calculated sell-through increases from 80% to 91%.

The metrics view will now display insights for both Full Price (FP) and Markdown (MD) sales during the transition. This enables users to accurately report sales volumes for markdown versus full price. Planning markdowns will give you insight into the Gross Margin shifts as well. An increase in sell through percentage from 80% to 91% shows that we are moving the product but we are also able to identify what loss we have on margin $ and how it impacts the overall assortment.

Additionally, inventory devaluation is applied during the first week of markdown to revalue inventory at the markdown price under retail accounting. This includes insights into both the value of inventory being marked down and the associated devaluation.

If the calculated sell-through still does not meet the user’s objectives, additional markdown cadences can be established. Setting “Markdown After Weeks” determines the timing of transitions from the First to the Second Markdown.

Toolio enables users to review the product's full lifecycle, from full price to clearance. This includes evaluating margin degradation and inventory devaluation, providing a comprehensive understanding of the markdown strategy’s impact.