How far a price falls in a markdown is a calculation rather than a judgement. The main input is the relationship between remaining stock and remaining time.

Cover is stock divided by sales rate

Weeks of cover expresses the stock on hand as the number of weeks it would last at the current rate of sale. It is the standard measure for this decision.

Comparing cover against the weeks left in the selling window immediately shows whether the stock will clear. More cover than weeks remaining means it will not.

The size of that mismatch is what the markdown has to close, by lifting the rate of sale enough for the two figures to converge before the window ends.

Price elasticity converts a gap into a percentage

Every product has an observed relationship between price reduction and increase in units sold, derived from how it behaved during previous promotions.

That relationship is used in reverse. Knowing how much the sales rate must rise, the required reduction can be read off the historic response curve.

Products with weak response need much deeper cuts to move the same quantity, which is why identical stock positions produce very different discounts across categories.

Cost sets a floor, not the price

Once a product is bought, its cost is already spent and cannot be recovered by refusing to sell. That makes cost largely irrelevant to the markdown decision.

The relevant comparison is between what the stock will realise now and what it would realise through any other route, including disposal to a clearance buyer.

This is why clearance prices sometimes fall below what the retailer paid. Selling below cost is still better than holding stock that has no remaining route to a customer.

Space is the constraint that forces the issue

Shelf and warehouse space is finite, and the incoming season needs it. Stock that does not clear does not merely fail to sell, it prevents the next range from performing.

The cost of holding old stock therefore includes the sales lost on whatever would have occupied the space, which is generally larger than the value of the old stock itself.

Online sellers face a weaker version of the same constraint through warehouse fees, which accumulate for as long as a unit remains unsold.

Reading depth as information

An unusually deep reduction says more about stock position than about the product, and typically indicates a buy that ran well ahead of demand.

Shallow reductions late in a season indicate the opposite, that stock is already close to clearing and the retailer has no pressure to go further.

Neither pattern says anything about quality. The depth of a discount is a measurement of a planning outcome, not of the item on the shelf.