Discount vs Sell-Through Calculator

Why "discount until it sells" burns cash

Markdown decisions usually happen under pressure: the season is ending, a new range is landing, the warehouse is full, and someone proposes 40% off because it "needs to move". Sometimes that is right, and often it torches cash, because the relationship between discount depth and outcome is not linear and intuition is poor at compounding weekly rates over an eight-week deadline.

A deeper cut moves stock faster but earns less on every unit, including all the units a shallower cut would have sold anyway. In the example data, a 60% markdown clears 99.9% of stock and recovers less cash than doing nothing at all ($71,899 against $87,621), while gross profit collapses to a fifth. The stock is gone and so is the money. This tool exists to catch that trap before it happens.

How the calculator works

For every discount level in your range, the tool runs a weekly depletion simulation using the retail definition of sell-through: each week you sell a percentage of the stock remaining at the start of that week. Discounts raise that percentage: each 10% of markdown adds your "demand lift" to the weekly rate.

Because the rate applies to remaining stock, weekly unit sales slow as inventory shrinks, which is the familiar clearance long tail. That is why the tool reports weeks to 95% cleared (computed exactly from your rate) rather than pretending stock hits zero, and shows the share actually cleared by your deadline.

Each discount level is then scored on three absolute scales:

• Cash recovered: revenue within the horizon, as a share of your inventory's full-price value. For clearance, unit cost is sunk; cash in the door is the point.
• Sell-through: the share of stock cleared by the deadline.
• Margin: unit margin at the markdown price, relative to full-price margin. Below-cost levels score negative here and get flagged, never hidden.

Your three weights blend those into one score, and the highest score wins. Because the scales are absolute, widening the tested range never re-shuffles existing scores. That fixes a flaw in most markdown models, including this tool's original version, which normalised within the tested range and quietly moved the "optimal" whenever you dragged a slider.

A worked example

The example: 2,000 units that cost $30 and retail at $90, selling 8% of remaining stock weekly at full price, with an 8-week deadline and demand lifting 8 points per 10% of markdown. Priorities: cash 50%, sell-through 30%, margin 20%.

Holding at full price recovers $87,621 but clears less than half the stock: 974 units sold, with over a thousand still on the shelf when the deadline hits. The recommended 19% markdown nearly triples the weekly rate (8% to 23.2%), clears 87.9% of stock, and recovers $128,154, about $40,500 more cash than doing nothing, with gross profit also up ($75,416 against $58,414). Deeper cuts keep improving sell-through but start giving cash back: 30% off clears 95% yet recovers $8,000 less than 19% off, and 60% off clears everything while recovering less than full price would have.

The chart tells the story at a glance: the cash curve rises, peaks around the high-teens, and falls away, while the dashed sell-through curve climbs towards 100%. Your weights decide where on that trade-off you want to sit; the score just makes the choice explicit.

Reading the results like an inventory planner

• % cleared by horizon is your deadline number. If it's too low at the recommended discount, either extend the horizon, accept a deeper cut (shift weight to sell-through), or plan a second markdown for the tail.
• Weeks to 95% tells you whether the tail outlives your patience. A discount that clears 95% in 11 weeks against an 8-week deadline means a remnant to deal with. Price that reality in with the salvage input.
• Leftovers aren't free. The advanced inputs put a value on unsold units (jobber/outlet salvage) and a cost on storing them week by week. With those set, "total recovered value" shows the full picture (cash plus salvage minus holding) alongside the score.
• Staged markdowns beat single ones in practice. This model prices one level for the whole window; classic retail practice starts shallow and deepens on a schedule. Run the tool at each stage's depth to sanity-check the ladder.

When to go below cost

For clearance, unit cost is a sunk cost: the money is spent whether the stock sells or rots. So pricing below cost is not automatically wrong. For obsolete, seasonal or space-blocking stock, cash now genuinely beats cost accounting. Doing it by accident is the real mistake. The tool shades below-cost territory on the chart, badges every below-cost row, and warns when the recommendation lands there, so if you cross that line, you crossed it on purpose, with the salvage alternative priced in.

Assumptions and limitations

• Demand lift is linear and yours. Each 10% of markdown adds a constant number of points to the weekly rate. Real response curves bend; validate the first two weeks of a markdown against the model and adjust.
• Demand scales with stock. Selling a fixed share of remaining inventory assumes visibility and choice shrink alongside stock (typical for fashion clearance with breaking size runs). For products where demand is a fixed units-per-week, the model is conservative late in the run.
• One product, one markdown, no strategy effects. No halo or cannibalisation on the rest of the range, no pull-forward, and no training customers to wait for sales. Judgement is still required.
• The weights are a preference, not physics. The score makes your trade-off explicit and consistent; it can't tell you what to value.

For discounting on ongoing ranges, where conversion uplift and net profit set the answer, use the Optimal Discount Calculator. If the stock problem is really a buying, pricing or channel problem in disguise, we can help with that too.