Retail Markdown Calculator
Calculate the markdown percentage, the reduced selling price, and the dollar amount marked down from the original retail price. Useful for clearance pricing, seasonal sales, and inventory liquidation planning.
How to use this tool
- Enter original retail price and sale (marked-down) price in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your markdown percentage and the full breakdown beneath it.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
Dollar Markdown = Original Price − Sale Price
Markdown % = (Dollar Markdown ÷ Original Price) × 100
How it works
A retail markdown is a permanent or temporary reduction from the original retail price, intended to stimulate demand, clear slow-moving inventory, or match competitor pricing. Markdown percentage is always calculated relative to the original retail price.
Markdown differs from markup: markup is computed on cost (how much above cost the price is set), while markdown is computed on the original selling price (how much it has been reduced). Retailers track markdown ratios as a key metric for pricing effectiveness and inventory health.
Worked example
$80 Item Marked Down to $56
- Dollar markdown = $80 − $56 = $24.00
- Markdown percentage = ($24 ÷ $80) × 100 = 30.00%
The item is marked down by $24.00, representing a 30.00% markdown from the original retail price.
Common mistakes to avoid
- Confusing markdown percentage with margin reduction — a 20% markdown on price does not reduce margin by 20 percentage points; the margin impact depends on the original cost structure.
- Calculating markdown percentage on the sale price instead of the original price — by convention, markdown percent = dollar markdown / original price, not dollar markdown / sale price.
- Failing to check whether the marked-down price still covers cost of goods, which can occur on deep-clearance markdowns and results in selling at a loss.
Key terms
- What is a markdown in retail?
- A markdown is a reduction from the original retail price of a product. It may be temporary (a sale) or permanent (a price adjustment due to poor sales or end of season).
- How does markdown differ from discount?
- A discount typically refers to a reduction off the list price offered to specific customers (e.g., wholesale buyers), while a markdown is a broader reduction to the retail shelf price for all customers.
- How does markdown differ from markup?
- Markup is expressed as a percentage of cost price; markdown is expressed as a percentage of the original selling price. A 30% markdown on an $80 item reduces the price by $24; a 30% markup on a $60 cost produces an $18 profit.
- What is a markdown ratio?
- The markdown ratio is total dollar markdowns divided by net sales, used by retailers to assess pricing discipline and how much revenue is lost to price reductions in a given period.
Frequently asked questions
- What is the difference between markdown and discount?
- Markdown is a permanent or semi-permanent reduction in the listed retail price, typically to clear inventory. A discount is usually a temporary price reduction offered to specific customers or via a coupon. Both reduce selling price, but markdowns affect the base price while discounts are applied at checkout.
- How does a markdown affect gross profit per unit?
- Gross profit per unit falls by the dollar amount of the markdown, assuming cost is unchanged. If the original price was $50, cost $30 (margin = 40%), and you markdown by $10, the new gross profit is $10 and margin drops to 25%.
- When should a retailer take a markdown rather than waiting for full-price sale?
- When holding costs (storage, insurance, obsolescence risk) plus the opportunity cost of tied-up cash exceed the expected revenue gain from waiting, an immediate markdown is the better economic decision.