Sell-through and Markdown Planning: When to Cut Prices, and by How Much

Markdowns are a planning decision, not a reaction. Brands that mark down early on the right styles usually sell more at a smaller discount than brands that wait for the end-of-season sale and discount everything. The tool for this is sell-through — the share of units received that has sold — projected forward at the current rate of sale.

The formulas

• Sell-through to date = units sold ÷ units received.
• Rate of sale = units sold ÷ weeks on floor.
• Weeks of cover = units in hand ÷ rate of sale.
• Projected sell-through = (units sold + rate of sale × weeks left) ÷ units received, capped at 100%.

If projected sell-through is below your target for the season, the style will finish with stock unless something changes — price, placement, promotion or transfer to a store where it sells.

Set your rules before the season

The workbook asks you to set rules on a separate sheet: the target sell-through for the season and the markdown steps. For example (illustrative): if the gap between target and projected sell-through is 10 points or more, suggest a first markdown of 20%; if it is 25 points or more, suggest 40%. Set your own thresholds from your margin structure and past markdown results. Writing rules down before the season stops markdown decisions from being driven by whoever shouts loudest in the weekly meeting.

Weekly routine

1. Update units received, units sold and weeks on floor for each style (or import from your sales report).
2. Update weeks left in the season on the Rules sheet.
3. Sort by projected sell-through. Review the bottom of the list first.
4. For each flagged style, decide: markdown, move to better-selling stores or online, re-merchandise, or hold if a festival or event is coming that will lift it.
5. Record the decision and the new price; next week, check whether the rate of sale responded.

Before you mark down

• Is it really slow, or out of key sizes? A style with a broken size run will look slow; markdown will not fix it.
• Is it in the right place? A style that sells in two stores and not in ten may need transfer, not markdown.
• Is a demand event coming? Ahead of Diwali or a wedding date cluster, a slow festive style may still sell at full price — check the festival calendar in our Q3/Q4 workbook.
• What did markdowns achieve last season? If a 20% markdown on similar styles did not move the rate of sale, try placement first.

Margin effects

A markdown reduces the margin on every unit sold after it. Track gross margin after markdowns by style and category over the season, not just at the end. The price-after-markdown column in the workbook helps you see the new selling price quickly; your accounts give the actual margin.

End of season

Decide in advance what happens to residual stock: end-of-season sale, outlet, wholesale liquidation, or carrying basics to the next season. Planned exits recover more than unplanned ones.

The open-to-buy planner links markdowns to future buying — planned markdowns are part of the OTB formula.

Worked example (illustrative)

Style 102 received 500 units and sold 150 in six weeks — 30% sell-through, 25 units a week. With six weeks left at that rate it would sell another 150 and finish at 60%. Against a 75% target the gap is 15 points, which under the illustrative rules suggests a 20% first markdown. Before marking down, the merchandiser checks sizes (all available) and placement (only in four of ten stores' front tables), moves it forward in the other six stores, and marks down only if the next week's rate of sale does not improve.

Common mistakes

• Waiting for the end-of-season sale to act.
• Marking down styles that are really out of key sizes.
• Deep first markdowns that leave no room for a second step.
• Not measuring whether the markdown changed the rate of sale.