The quickest way to calculate sale price and markdown percentage.
Table of Contents
- How can this retail markdown calculator help you?
- How to calculate markdown?
- Markdown formula
- Different formulas that may be proven useful when doing markdown calculations
- Markdown percentage formula
- Benefits of markdowns done right
- Risks of markdowns done badly
- How to organize a successful markdown campaign?
Whether you work in sales or are just interested in retail, an easy markdown calculator will likely come in handy. It will assist you in determining the retail markdown and the markdown percentage, as well as calculating the actual selling price in relation to the former.
If you are not familiar with any of these terms, don't worry. Keep reading this article to learn their definitions, and follow our simple step-by-step guide to calculating the markdown price. Thanks to our tool, all your attempts to obtain dynamic pricing access will come to fruition.
How can this retail markdown calculator help you?
Let's start with a swift explanation as to what a markdown is. A markdown is a product's price reduction based on the inability to sell it at the initial or original selling price. Simply put, a markdown is a gap between the original retail price and the actual selling price.
Marking down, therefore, means discounting the selling price of your goods to speed up their purchase and improve the overall cash flow. However, you must ensure that you do not incur any losses by decreasing the price too drastically.
A markdown differs from a discount in that the second one is frequently given to a certain group of people while markdowns are available to every customer. If you plan to organize a discount campaign, use our discount calculator instead.
Markdown Calculator can be used in a variety of different modes. Among the most popular functions offered by this tool, you will find ways to:
- Calculate markdown by original price and promo price – most commonly used. It is especially helpful when you already have a specific promo price in mind but need to figure out what percentage of markdown to adapt,
- Calculate promo price by original price and markdown – specifically used when a percentage of markdown is already determined, and you just need to find out the final sale price,
- Calculate original price by promo price and markdown – least common, helps you discover the initial price of goods before it was decreased to its final promo version.
How to calculate markdown?
Before we move on to more advanced calculations, let's focus on finding out how to calculate markdown in its most basic form. In order to do that, follow a quick step-by-step guide inserted below.
Example A. Let's assume that you have a candy store and purchased three different types of chocolate boxes from the same factory. After a month or so, you realize that your customers choose to buy only the first two types of boxes while the other one remains untouched. Deciding that you don't want to keep this product in your store forever, you want to use a markdown.
The original selling price for each one of the boxes was $20, and you decided to introduce a 40% markdown for the one left behind. How can you find out what the required list price will be?
markdown price = original_price x (1 - markdown / 100%)
- Begin by determining the original selling price – in this case. It is $20.
- Then, set the markdown percentage – in this example, 40%.
- Following that, you will see the markdown amount and the actual selling price, which in this case are $12 and $8, respectively.
Different formulas that may be proven useful when doing markdown calculations
Example B. Let's imagine that you want to buy a dress. You finally found the one that fits you, so you purchase it. At the counter, the seller informs you that you're in luck because the price of this particular dress has just been reduced by 20%. Now, the product costs $50. What should you do in order to find out the original price of the dress?
original_price = Markdown price / (1 - markdown/100%)
original_price = $50 / (1 - 20%/100%)
original_price = $50 / 0.8
original_price = $62,50
Example C. Let's imagine you want to sell some posters that have been dusting on your shelves for a long time. Originally, you set a price - of $100 each, but nobody was interested in purchasing them. You really want to get rid of them, so you decide to sell them for 40$. How can you calculate the markdown percentage on this product?
Markdown percentage formula
markdown_percentage = (original_price - markdown_price) / original_price * 100%
markdown = original_price - markdown price
markdown = $100 - $40
markdown = $60
markdown_percentage =(markdown / original_price) x 100%
markdown_percentage = ($60 / $100) x 100%
markdown_percentage = 60%
Benefits of markdowns done right
Markdowns can bring you an array of benefits if done properly. Similarly, markups done badly can cause a real detriment to your business. For now, let's focus on the importance of applying a good markdown policy and the results that it can provide, such as:
- helping to get rid of low-performing products,
- improving overall cash flow,
- bringing more customers due to the attractive promotions,
- Improving profits.
It's important to note that although the markdown decreases the margin, the benefits it carries can effectively boost your company's net profit.
Risks of markdowns done badly
Among the risks that may appear due to the inappropriate markdown policy, the most detrimental is:
- the decrease in overall gross margin, without the benefit of a significant increase in turnover,
- The lower net profit.
How to organize a successful markdown campaign?
Assuming you're a responsible business owner, you've probably understood the utmost importance of organizing a successful markdown campaign. But what are the steps that you can take in order to ensure the fruition of your plan? Let's take a look.
- Firstly, you need to identify the poorly performing products. There's no need to decrease the price of your best sellers since they will always be in demand.
- Verify if the price is the actual problem of the low performance of these products. Maybe your goods just need better descriptions, or they lack a proper advertisement.
- Calculate the promo price for each product that qualifies for a markdown and follow the formulas listed above in this text.
- Keep in mind to always make sure that you still have a positive margin even after the markdown.
- To urge customers to restrict the time frame of the markdown.
- Don't forget to communicate this new offer to potential customers.
This website is definitely an essential tool used by every reasonable business person. Use CalcoPolis regularly and no longer be in doubt whether you made an easily avoidable mistake. If you are interested in similar tools, try our markup calculator or margin calculator.