Scenario: Markdown cost calculation

This scenario demonstrates how tiered markdown levels are applied across the product lifecycle. Markdown cost savings are calculated during fulfillment optimization.

Use case 1: Regular markdown at the store

A product that is valued at $100 is not selling as expected in stores.

Action:

  • Level 1 markdown: A modest reduction, for example, $85 after 30 days of launch.
  • Level 2 markdown: A moderate reduction, for example, $60 as the season progresses.

Benefits:

  • Enables gradual discounting instead of a steep one-time markdown.
  • Helps to clear inventory while margins are preserved early in the lifecycle.

Use case 2: Regular markdown at the distribution center

Excess inventory is piling up at the distribution center (DC).

Action:

  • Level 1 markdown: A 30% discount is applied after 45 days in the DC.
  • Level 2 markdown: A 50% discount is applied after 75 days if inventory is not transferred to stores.
Benefits:
  • Encourages store transfers or liquidation before inventory becomes obsolete.
  • Reduces holding costs at the DC.

Example: Markdown cost calculation

This example demonstrates how markdown cost savings are calculated during fulfillment optimization by comparing sales with and without an online order.

Data for markdown cost calculation during optimization
Table 1. Markdown cost calculation
Parameter Value
Available inventory at ship node 10 units
Store price 5.00 USD
Online price 4.00 USD
Predicted sales at store 0.2 units per day
Overall sales 0.2 units per day
Online sales 0.0 units per day
Order date 26 February 2026
Quantities ordered 1, 2, 3
Markdown schedule
Table 2. Markdown schedule
Markdown level Date Price (USD)
Level 1 05 March 2026 3.00
Level 2 05 April 2026 2.00
Final Summary
Table 3. Final summary
Quantity ordered Sales if not ordered (USD) Sales if ordered (USD) Markdown cost savings (USD) Markdown level reached
1 29.29 31.39 2.09 Level 2
2 29.29 33.43 4.14 Level 2
3 29.29 35.01 5.72 Level 1
  • As online order quantity increases, remaining inventory decreases faster, reducing the number of units available for future markdowns.
  • Higher online order quantities shift markdown savings to earlier periods.
  • The markdown level that is reached changes when inventory is depleted before later markdown dates.

For more information about tiered markdown support, see Tiered markdowns.