How Poor Markdown Pricing is Costing Millions

Markdowns are a fundamental aspect of retail, but are they working for you—or against you? Many retailers struggle with ineffective markdown pricing execution, which leads to unnecessary waste, lost margins, and inconsistent pricing strategies. The result? Millions in lost revenue each year.

In a time when profit margins are tighter than ever, retail markdown optimization can have a significant impact on your bottom line. Yet, many retailers still rely on manual, static pricing, and outdated markdown processes that fail to maximize sell-through and minimize waste.

In this blog, we delve into the reasons markdown inefficiencies occur and examine the financial impact of mismanaging markdowns. Additionally, we discuss how AI-powered Dynamic Markdown Pricing can enhance sell-through rates and minimize waste in the retail environment.

The Markdown Pricing Problem: Why Retailers Are Losing Money

Retailers use markdowns to sell products before they become waste, but many are either using historic and outdated processes or fall foul of poor execution. This will culminate in a number of contributing factors which see retailers losing out on sell-through and increasing the volume of products binned.

1. Poorly Timed Markdowns
Many retailers wait too long to mark down items, missing the optimal window for selling at the best possible price. By the time products receive their first markdown, customers may have already chosen fresher alternatives, resulting in higher waste levels and more drastic final discounts.  2. Over-Discounting & Margin Loss  
Without a dynamic pricing strategy, markdowns often become too aggressive, unnecessarily cutting into profits. Many retailers apply a static discount (e.g., 50% off all near-expiry products) instead of using data-driven markdowns that optimize both sell-through and profitability.  

3. Inconsistent Compliance & Execution
Even when retailers have dynamic markdown pricing strategies in place, execution varies by store. Some locations fail to mark down items on time, while others apply inconsistent discounts, leading to price mismatches, customer confusion, and compliance issues.  

The Financial Toll of Poor Markdown Pricing Execution

The ramifications of ineffective markdowns are widespread and costly:

• Increased waste: Unsold perishable goods and aging inventory lead to higher disposal costs and sustainability concerns.
• Lost revenue: Unoptimized markdowns mean retailers lose potential sales and profit they could have retained with better timing and pricing.
• Higher labor costs: Manual markdown processes consume hours of staff time, diverting resources from customer service and store operations.
• Inconsistent customer experience: Shoppers expect fair and transparent discounts; inconsistent pricing across stores creates frustration and erodes trust.

The Solution: AI-Powered Dynamic Markdown Pricing

Instead of relying on static, manual markdowns, there are solutions that provide real-time pricing insights at the SKU level. Dynamic Markdown Pricing systems use AI and automation to:

• Optimize discount levels in real time based on demand, shelf life, and sales patterns.
• Apply markdowns at the right time to maximize sell-through before waste occurs.
• Ensure markdown compliance across all stores, reducing inconsistencies.
• Cut labor costs by automating markdown decisions rather than relying on staff judgment.

By harnessing the extensive data at their disposal, retailers can leverage a dynamic markdown pricing system to quickly identify areas where an item can achieve higher sales. These systems integrate smoothly with existing store operations and offer timely alerts to in-store teams regarding the best moments for markdowns.

Additionally, these systems provide comprehensive visibility across the entire estate, offering insights into regional, store, department, and product-level trends. Armed with this information, teams can enhance their merchandising and inventory strategies, ultimately reducing waste from the outset.

How Retailers Are Winning with Smart Markdown Strategies

A leading UK grocery retailer implemented AI-driven markdown pricing and experienced:

• A reduction in markdown-related waste.
• 5% sell-through rate improvement with dynamic discounts.
• Improved compliance across all stores.

By utilizing real-time data and automation, they eliminated late and inconsistent markdowns, ensuring every discount maximized sales, not just price reductions.

Are you ready to take control of your markdown pricing execution?

Markdowns don’t have to drain profits—when executed with the right strategy, they can be a powerful tool for optimizing revenue and reducing waste. 

If your stores are still relying on manual markdown processes, you’re leaving money on the table. With WasteInsight’s AI-powered Dynamic Markdown Pricing, you can:
•    Reduce markdown waste by optimizing price reductions at the right time.
•    Increase sell-through without unnecessary deep discounts.
•    Ensure markdown compliance across every store location.
•    Cut labor costs by automating pricing decisions.

WasteInsight offers an innovative approach to managing waste and enhancing sustainability within your operations. By providing real-time data analytics, WasteInsight helps you identify waste-generating items, streamline your processes, and ultimately reduce costs. With its user-friendly interface, you can effortlessly track waste patterns and implement strategies that align with your markdown efforts. 

Integrating WasteInsight into your markdown strategies not only improves efficiency but also supports your commitment to sustainability. By minimizing waste, you enhance profitability while contributing to a greener future. 

Let’s discuss how you can reduce markdown waste.

Book a free demo today!