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 common strategies for driving additional demand through price adjustments, while balancing sell-through and margin targets. Toolio's markdown planning enables you 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 devalues your inventory at retail. A discount is a promotion that is only accounted for at the point of purchase. Discounts are temporary and can be blanketed across categories and applied on top of markdowns.

💡 When a Default Discount % and a markdown are planned at the same time, Toolio applies the Default Discount % only until the First Markdown Week, beyond which Toolio only applies the markdown. Below is a quick visualization.

Identifying products for markdowns can be influenced by various factors. 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, you 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. You are not required to set each stage — the First Markdown automatically extends 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.

Sets a specific week in which the markdown begins.

Alternatively, specifies a strategy to initiate markdowns after a set number of weeks. This enables a standardized cadence from full price to markdown pricing when products are initially set up.

Defines the percentage off the ticket price to apply to sales and inventory for markdowns.

The First, Second, and Clearance Markdown Percentages are multiplicative — each stage applies on top of the previous stage's already-marked-down price.

Example — $100 ticket price with First Markdown 10%, Second Markdown 20%, and Clearance Markdown 30%:

Specifies the expected sales lift resulting from the markdown. Leave this blank if markdown sales are already factored into the product's lifecycle plan.

Unlike Markdown Percentages, the First, Second, and Clearance Markdown Lift Percentages are not cumulative and not multiplicative. Each lift only applies to demand during the weeks that fall within its own markdown stage. When a later markdown stage begins, its lift replaces the previous one — it does not stack on top.

Example — a product with First Markdown lift of 10%, Second Markdown lift of 20%, and Clearance Markdown lift of 30%:

When the First Markdown cadence is set, the remaining lifecycle of the product — between the markdown date and the product's end date — is considered 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 now displays insights for both Full Price (FP) and Markdown (MD) sales during the transition. This enables you to accurately report sales volumes for markdown versus full price. Planning markdowns also gives you insight into Gross Margin shifts — an increase in sell-through percentage from 80% to 91% shows that product is moving, while also surfacing the loss on margin $ and its impact on 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 your 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 you 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.

The following video walks through different approaches to implementing a markdown strategy.