What is the primary purpose of a markdown?

The primary purpose of a markdown is to stimulate sales and clear out excess inventory. Retailers often use markdowns as a strategic tool to encourage customers to purchase items that may not be selling well at their original price. By reducing the price, retailers aim to attract more customers, increase the volume of sales, and ultimately make space for new inventory. This approach helps to prevent losses associated with holding onto unsold stock and can improve cash flow as well.

This strategy is particularly effective when seasonal items or outdated merchandise need to be sold before new trends or products come in. Markdowns can also create a sense of urgency among consumers, prompting quicker purchasing decisions. Thus, while enhancing brand image, increasing profit margins, or managing employee performance are important aspects of retail operations, they are not the primary focus of implementing a markdown.