Markdowns Cost U.S. Retailers $300 Billion in 2018


As of Thursday, February 7, 2019

Who doesn’t love a sale? Consumers do, but for retailers the idea of discounting merchandise by 10 percent to 25 percent adds up.

According to a recent U.S. retailer survey of more than 200 senior retail decision-makers, markdowns cost non-grocery-store retailers $300 billion in revenues in 2018, or 12 percent of their total sales.

“Ever-expanding choice and rapid changes in consumer behavior are increasing the pressure on retailers to make smart merchandising decisions, and these pressures show no signs of easing,” said Deborah Weinswig, the chief executive and founder of Coresight Research, which conducted the survey for Celect, a company in Boston that does predictive analytics and inventory optimization for retailers.

Other findings from the survey included:

Inventory misjudgments were a primary markdown driver and barrier to selling at full price, accounting for 53 percent of unplanned markdown costs.

Multi-channel retailers had a lower propensity to sell inventory at full price because their overbuying/underbuying inventory formula gets even more complicated with channel expansion.

About 86 percent of survey respondents identified specific ways in which advanced analytics could help their retail sector sell more products at full price.

“To stay competitive in today’s challenging retail landscape, retailers need to understand the impact of complex inventory decisions and the potential for upside,” said John Andrews, chief executive of Celect.