What is Markdown?
Markdown is a reduction of the product price based on the inability to sell it at the initial price or the original selling price. In other words, markdown is the difference between the original retail price and the actual selling price. For example, a shirt in a clothing shop can have an initial selling price of $50. If almost no one wants to buy it at this price, it is common that a markdown (for example of 25%) is introduced — so the shirt now costs only $40.
While the shop owner will have a lower profit on each sold shirt, they might actually sell more shirts than before. In this way, the retailer can turn merchandise into cash faster, thus increasing cash flow.
Markdown is a bit different from a discount: discounts are usually offered to a specific group of people (students, frequent buyers), while markdowns are offered to everyone.
Markdown Calculation Process
Our markdown calculator includes the most relevant variables:
- Original selling price — The initial price, which is subject to the markdown.
- Actual selling price — The price of the product after introducing the markdown.
- Markdown — The value that corresponds to the price reduction of a particular product; from the customer perspective, it is the amount of money saved when buying the product.
- Markdown percent — The percentage lowering of the price of your product.
How to Use This Markdown Calculator — an Example
Let's assume you have a shoe shop and purchased 20 pairs of three different colors (blue, green, and red) from the same model. After a month, you realize that customers buy mostly blue and green ones, but the stock of red ones remains untouched. As you don't want to keep this product on your shelves forever, you decide to use a markdown.
- The original selling price for all three kinds was $50.
- You decided to introduce a 25% markdown for the red shoes.
- Select your currency (e.g. USD) and choose "Markdown Percent → Actual Price" mode.
- Enter the original price: $50.
- Enter the markdown percent: 25%.
- Result: Markdown amount = $12.50, Actual selling price = $37.50.
You can also enter a quantity (e.g. 20 pairs) to see total savings across all units.
What is the Markdown Price Formula?
The markdown formula depends on which values you know:
- Markdown = Original Price − Actual Price
- Markdown % = (Markdown ÷ Original Price) × 100
- Actual Price = Original Price − Markdown
- Actual Price = Original Price × (1 − Markdown% ÷ 100)
For instance, if the original price was $100 and the good is actually sold for $80, then the markdown equals $20 and the markdown percent is 20%.
How Do I Calculate the Markdown Percentage?
To find the markdown percentage, divide the markdown amount by the original price and multiply by 100:
Markdown % = (Original Price − Actual Price) ÷ Original Price × 100
Example: Original price $120, actual price $90 → Markdown = $30 → Markdown% = (30 ÷ 120) × 100 = 25%
Currency & Measurement System Support
Our markdown calculator supports 30+ world currencies including USD, EUR, GBP, JPY, CNY, INR, BRL, RUB, and many more. Simply select your currency from the dropdown.
The calculator also supports both Imperial (pounds, ounces, feet, yards, gallons) and Metric (kg, grams, liters, meters) measurement systems for product quantities, making it useful for any type of merchandise — from clothing to food products.
FAQs
- What is the difference between markdown and discount?
- A markdown is a permanent reduction of the retail price available to all customers. A discount is typically a temporary reduction offered to specific customer groups (e.g., loyalty members, students).
- Can the markdown be greater than the original price?
- No. The markdown amount cannot exceed the original price. A 100% markdown means the product is given away for free (actual price = $0).
- What does markdown mean for cash flow?
- Markdowns help retailers convert slow-moving inventory into cash faster. Even though profit per item decreases, higher sales volume can improve overall cash flow and free up shelf space for more popular items.
- Can I calculate total savings for multiple items?
- Yes! Enter the quantity in the Quantity field to see total savings across all units.