Markdown pricing

Definition updated on November 2023

How does markdown pricing impact product pricing and consumer behavior?

Markdown pricing is a pricing strategy where items are deliberately reduced from their original selling price. This reduction is typically done to promote sales, clear out old or excess inventory, or respond to products not selling as expected. In the sneaker reselling industry, not every release or model guarantees a successful sell-out. Factors like overestimation of demand, sudden changes in sneaker trends, or an oversaturated market can lead to certain sneakers not selling as quickly or at the desired price point. When this happens, resellers might implement markdown pricing to move these products faster. By reducing the price, they make the sneakers more attractive to potential buyers. Markdowns can be temporary, such as during a sale event, or permanent until the stock is cleared. It's crucial for resellers to calculate the extent of the markdown carefully. Reducing the price too much can eat into profits, while a minimal reduction might not stimulate the desired sales increase. The goal is to find a balance where the reduced price attracts customers, but the sale still remains profitable or minimizes losses. It's worth noting that while markdown pricing can accelerate sales, it can also affect the perceived value of the product or the brand if done too frequently or drastically.

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