What does "markdown optimization" aim to achieve?

Markdown optimization aims to achieve a balance between maximizing sales and minimizing inventory costs. This process involves strategically reducing the prices of products to stimulate demand and encourage purchases, particularly for items that may not be selling as well as expected. The goal is to find the right price point that attracts customers, thereby increasing the likelihood of sales while also ensuring that the inventory does not linger excessively, which can lead to increased holding costs or eventual markdowns that could impact profitability.

While increasing product prices, reducing marketing expenditures, or completely eliminating all unsold inventory might seem beneficial, they do not directly address the primary objective of markdown optimization. Instead, the aim is to use thoughtful markdown strategies that optimize revenue and minimize unnecessary costs associated with unsold products. By doing so, retailers can maintain a healthier inventory turnover and better cash flow.