What is "markdown optimization"?

Markdown optimization refers to the strategic approach to determining the most effective price reductions for products to enhance sales. This involves analyzing factors such as consumer demand, inventory levels, and market trends to establish pricing strategies that will encourage purchases without significantly eroding profit margins. By optimizing markdowns, businesses can efficiently manage their inventory, attract customers, and ultimately maximize revenue during sales events or clearance periods.

The focus is on finding a balance that incentivizes buyers to make a purchase while ensuring that the price cuts align with the company's overall sales and profitability objectives. This strategic decision-making process can involve various analytical tools and methodologies to project how different markdown levels will impact overall sales volume and revenue outcomes.