Markdowns Module Three: Retail Pricing and Repricing of Merchandise 1 Ascertain the types of price adjustments and confirm their importance as merchandising decisions Calculate markdowns as dollar amounts and percentages Understand the differences between point-of-sale (POS) and permanent (physical) markdowns Understand the criteria for the determination of taking markdowns (outdate, weeks of supply, sell through percentage, build) Delineate the procedures for making price changes Recognize the impact of repricing decisions on profit, including the journalization of markdowns Objectives Employee discount Gross markdown Markdown (MD) Markdown cancelation Markdown journalization Markdown percentage Net markdown Outdate Permanent (physical) markdown Point-of-sale (POS) markdown Retail reduction Sell through percentage (ST%) Weeks of supply (WOS) Key Terms Key Concept Formulas Markdown Markdown $ Original or present retail price $ New retail price $ Markdown $ Percentage off Present retail price $ Total markdown $ First total $ markdown Second total $ markdown Planned Markdown $ N Markdown % Markdown % Markdown % Markdown cancellation Higher retail $ Markdown price $ New Markdown $ Gross markdown $ Markdown canelation $ Key Concept Formulas Sell Through Percentage Sell through % Weeks of Supply Weeks of Supply Universal aspect in retailing today Price reductions necessary to increase sales and create demand for product Price adjustments must be properly recorded to: Achieve an accurate book inventory figure Plan initial markup goals when pricing goods Control and manage the amount received in an attempt to merchandise at the gross margin and profit goals established Repricing of Merchandise (Markdowns) In the profit and loss statement, markdowns are a portion of retail reductions that affect gross margin and include: Point-of-Sale (POS) and permanent markdowns Coupons Employee discounts Repricing of Merchandise (Markdowns) Lowering or reducing of any retail price on one item or a group of items Markdown is the amount that reduces the inventory value Markdowns are expressed as a percentage of net sales for all product sold for a specific time period, usually a week, month, quarter, season, or year Important tool in merchandising and for buyers Is a means of promoting and increasing sales, but impacts the gross margin and must be monitored and controlled Markdowns Necessary merchandising tool buyers can use to their advantage in order to: Drive sales on a store, department, or class level Stimulate the sale of merchandise to which customers are not responding satisfactorily (i.e., merchandise not selling at acceptable sell through rates) Drive customer traffic to stores or website by offering sales Meet competitive prices/price matching The Purpose of Markdowns Free up open-to-buy to bring in new merchandise on order and reorder merchandise that is .

1. Markdowns
Module Three:
Retail Pricing and Repricing of Merchandise
1
Ascertain the types of price adjustments and confirm their
importance as
merchandising decisions
Calculate markdowns as dollar amounts and percentages
Understand the differences between point-of-sale (POS) and
permanent (physical) markdowns
Understand the criteria for the determination of taking
markdowns (outdate, weeks of supply, sell through percentage,
build)
Delineate the procedures for making price changes
Recognize the impact of repricing decisions on profit, including
the journalization of markdowns
Objectives

2. Employee discount
Gross markdown
Markdown (MD)
Markdown cancelation
Markdown journalization
Markdown percentage
Net markdown
Outdate
Permanent (physical) markdown
Point-of-sale (POS) markdown
Retail reduction
Sell through percentage (ST%)
Weeks of supply (WOS)
Key Terms
Key Concept Formulas
Markdown
Markdown $ Original or present retail price $ New retail price
$
Markdown $ Percentage off Present retail price $
Total markdown $ First total $ markdown Second total $
markdown
Planned Markdown $ N Markdown %
Markdown %

3. Markdown %
Markdown cancellation Higher retail $ Markdown price $
New Markdown $ Gross markdown $ Markdown canelation $
Key Concept Formulas
Sell Through Percentage
Sell through %
Weeks of Supply
Weeks of Supply
Universal aspect in retailing today
Price reductions necessary to increase sales and create demand
for product
Price adjustments must be properly recorded to:
Achieve an accurate book inventory figure
Plan initial markup goals when pricing goods
Control and manage the amount received in an attempt to
merchandise at the gross margin and profit goals established
Repricing of Merchandise (Markdowns)

4. In the profit and loss statement, markdowns are a portion of
retail reductions that affect gross margin and include:
Point-of-Sale (POS) and permanent markdowns
Coupons
Employee discounts
Repricing of Merchandise (Markdowns)
Lowering or reducing of any retail price on one item or a group
of items
Markdown is the amount that reduces the inventory value
Markdowns are expressed as a percentage of net sales for all
product sold for a specific time period, usually a week, month,
quarter, season, or year
Important tool in merchandising and for buyers
Is a means of promoting and increasing sales, but impacts the
gross margin and must be monitored and controlled
Markdowns

5. Necessary merchandising tool buyers can use to their advantage
in order to:
Drive sales on a store, department, or class level
Stimulate the sale of merchandise to which customers are not
responding satisfactorily (i.e., merchandise not selling at
acceptable sell through rates)
Drive customer traffic to stores or website by offering sales
Meet competitive prices/price matching
The Purpose of Markdowns
Free up open-to-buy to bring in new merchandise on order and
reorder merchandise that is selling
Create special promotions or sales (e.g., for Mother’s Day or
Black Friday)
Clear fashion merchandise that has a short lifecycle
End-of-season clearance

6. The Purpose of Markdowns
Buyers are given a plan for markdowns in both dollars and
percentage.
Buyers will need approval by their divisional merchandise
manager or planner before taking the markdowns.
In order to have the markdown approved, buyers will need to:
Project the amount of markdowns needed to be taken
Project the sales increase (build) needed to cover the markdown
After the markdown is taken, buyers will need to compare the
actual markdowns taken to the plan to see if the desired sales
increase was achieved
Markdowns
Buying errors:
Overbuying in quantities
Poor timing in ordering merchandise
Receiving and accepting merchandise that has been shipped late
Unbalanced buying or accepting merchandise that is different

7. than ordered
Pricing errors:
Not taking timely markdowns
Setting the initial price too high
Not being competitive in price for the same product
Calculated risks of carrying “prestige” or trendy fashion
merchandise
Causes of Markdowns
Selling errors:
Poor stock keeping
Failure to display merchandise properly or advantageously
Uninformed sales associates
Special sales from stock:
Off-price promotions
Multiple sales (e.g., buy one, get one for 50% off)
Broken assortments
Necessary price adjustments
Remainders from special sales
Causes of Markdowns

8. Your first markdown is your least costly and most profitable; it
needs to be a smart markdown.
Why:
Buyers should have sufficient markup to cover costs and
expenses.
Timely in-season markdowns present a good assortment of
merchandise for customers to buy from.
“Wear now” product
Can sell the outfit; multiple unit sales
Reduction in end-of-season clearance markdowns
Timing of Markdowns
Accurate timing can reduce the amount of markdowns needed.
Buyers need to analyze their selling and take markdowns when:
Merchandise becomes slow selling
Customer demand is sufficient to sell the merchandise with a
minimum price reduction
Consumers’ interest in the merchandise decreases and new
product is being received
Competition has reduced the prices on like merchandise
Timing of Markdowns

9. The “right” markdown price depends on:
The reasons for the reduction
The nature of the merchandise
The timing of the selling season
The quantity on hand
The original (initial) markup
History of like-item pricing and customer response to that price
The Amount of the Markdown
Size of markdown must be substantial enough to produce the
planned results
Rules to be considered:
The first markdown should be sharp enough to move a
significant amount of the merchandise
The markdown should be sufficiently large to attract customers
who rejected the merchandise at its original price
The price may be reduced sufficiently to appeal to the next
price zone customer
The Amount of the Markdown

10. Calculating the dollar markdown
Concept:
Original or present retail $ - New retail $ = Markdown $
Problem:
A cashmere pullover that was not selling as well as planned was
reduced from $198 to $169. What is the dollar markdown?
Solution
:
Original or present retail $198
New retail-$169
Markdown $=$29
Markdown Calculations

11. On a group of items
Concept:
Original or present retail $ - New retail $ = Markdown $
Markdown $ x Units taken = Total Markdown $
Problem:
A buyer reduces 93 calculators from $15 to $10. What is the
total markdown in dollars?
Markdown Calculations