A higher ticket price can recover less inventory value.

Define two complete strategies

For each strategy, specify selling price, expected units sold, unsold units at one terminal date and additional holding costs. Value the remaining stock consistently, using net salvage or disposal value. Expected sell-through is an assumption; it does not follow automatically from the chosen price.

If the same stock has already been purchased under both alternatives, its historical acquisition cost is common and cancels from their difference. New purchases, different residual inventory values or materially different cash timing would require a broader model.

Worked example: lower price, higher future value

You own 1,000 units. A €40 markdown is expected to sell 900; waiting at €50 is expected to sell 650. Unsold units have a €5 terminal value. Waiting adds €500 holding cost, while the markdown strategy has no additional holding cost in this example.

Find the sell-through threshold

In the example, each markdown sale earns €35 more than leaving that unit for €5 salvage. Waiting recovers €28,750 above the common €5,000 salvage value after holding cost. The markdown therefore needs 821.43 expected sales, or 822 whole units, to match waiting.

This threshold is more actionable than saying that lower prices help clearance. Compare it with a defensible sell-through range. If expected markdown sales might be only 700, the original conclusion is not robust to that assumption.

Use the markdown decision worksheet

This worksheet maps to the free markdown calculator rather than to the campaign CSV. The two-strategy stock horizon is different from the workbench's supplied no-promotion unit benchmark. Keep the models separate when their questions differ.

Include the operational constraints

Expected sales cannot exceed stock. Include selling and handling costs consistently, and use a negative terminal value when disposal costs money. Consider whether the markdown changes brand positioning, future purchase timing or another product's sales; unvalued effects are outside this simple comparison.

Shopify's markdown guidance describes inventory and margin considerations, but a generic markdown percentage does not establish the demand response for your stock. This calculator compares supplied strategies; it does not optimize a demand curve it has not estimated.

Frequently asked questions

Can a markdown below original cost be rational? It can recover more future value than the feasible alternative for stock already owned. That does not erase the original loss or establish the best replenishment policy.

Should I enter zero salvage? Only if zero reflects the expected net terminal value. A convenient zero can conceal recoverable inventory or disposal expense.