Markdown Pricing

A retail management textbook describes a markdown as a permanent price adjustment a retailer uses to liquidate inventory, and a promotion as a temporary one. The difference matters: after a promotion the price goes back up; after a markdown it stays down or falls further, until the product sells out or leaves the range.

Markdowns are usually planned in steps, for example a first cut, then a deeper cut a few weeks later for what is left. The timing and size of those steps is the markdown cadence. Fashion and other seasonal categories rely on it most, because last season's stock loses value as the new season arrives.

In the EU, any announced price reduction must show the lowest price the trader charged in the 30 days before it, under Article 6a of the Price Indication Directive, inserted by Directive (EU) 2019/2161. Member states may set different rules for goods that perish or expire quickly and for products on the market for less than 30 days, and may let a progressive reduction refer to the price before the first cut. This is not legal advice; check the rules in each market you sell in.

A competitor's markdown is a signal about their stock. A first cut on a product line says it is selling slower than planned; a deeper second cut says it still is. That tells you where they over-bought, and which of your own products are now competing against a clearance price.

Markdowns can also hurt margin in the market as a whole. Companies say so themselves: NIKE reported in its fiscal 2025 annual report that gross margin fell 190 basis points to 42.7%, primarily due to higher discounts, changes in channel mix and higher inventory obsolescence reserves, in a year when it cut the supply of certain footwear through increased markdowns across NIKE Direct. If your direct competitors are clearing deep, matching them on the same products is rarely free.

This example is hypothetical. A competitor marks a line of linen shirts down 30% in late July. Three weeks later, the sizes still in stock are cut to 50%, and in early September the line disappears from the catalog.

Read in order, that is a markdown cadence: two steps about three weeks apart, then sell-out or removal. If the same competitor follows the same pattern next summer, you can expect the second step around the same week, and decide in advance whether to hold your price on comparable shirts or clear your own earlier.

1. Record price and reference price per product, every day. A markdown only shows up as a dated change in price; a snapshot cannot tell a markdown from a temporary sale.

2. Separate markdowns from promotions. A reduction that ends and returns to the old price was a promotion. One that stays, or deepens, is a markdown.

3. Track depth by step. Note the size of each cut and the days between cuts. See discount depth.

4. Watch stock and removals. Sizes going out of stock and products leaving the catalog show how the markdown is working.

5. Use one tool for all of it. RivalSweeper records each product's price and discount with a dated price history, stock status on supported websites, and catalog changes such as removed products. It checks each monitored competitor site daily, so a markdown is known within 48 hours.