Markdown Calculator
Enter an original price and markdown percentage to find the sale price, dollar savings, and the effect on your gross margin. Use reverse mode to find the original price from a sale price, or chain up to three successive markdowns to see the compounding effect. Results update as you type.
What is a markdown?
A markdown is a permanent or semi-permanent reduction of a retail price below the original selling price. Unlike a promotional coupon or a temporary sale, a markdown changes the tag price itself. Retailers use markdowns to accelerate inventory turnover, respond to competitive pricing pressure, clear end-of-season stock, or recover cash from slow-moving items. The markdown percentage is always calculated relative to the original selling price: if a $50 item is marked down to $35, the markdown is $15 on $50, which equals 30%.
Markdown vs. markup: what is the difference?
Markup and markdown are often confused because both deal with price differences, but they use different bases. Markup is the profit added on top of cost, so a 40% markup on a $10 item gives a $14 price (cost + 40% of cost). Markdown is a reduction from the selling price, so a 40% markdown on that same $14 item brings it down by $5.60 to $8.40. This asymmetry matters: a 40% markup does not cancel a 40% markdown. To recover to the original price after a 40% markdown, you would need a markup of about 67%.
How successive markdowns compound
When a retailer takes a second or third markdown, each cut applies to the already-reduced price rather than the original. Three separate 20% markdowns do not produce a 60% overall reduction. The math is: 1 - (0.8 x 0.8 x 0.8) = 1 - 0.512 = 48.8%. This compounding effect means successive small markdowns can erode price far faster than a single equivalent cut appears to. Use the Successive mode in this calculator to model any chain of markdowns and see the true effective percentage.
Margin impact and break-even analysis
Every markdown compresses gross margin because the cost of goods stays fixed while revenue falls. Switch to Margin mode to enter your unit cost alongside the original price and markdown percentage. The calculator shows gross profit (in dollars) and gross margin (as a percentage) before and after the markdown, plus how many margin points are lost. If the post-markdown gross profit is negative, you are selling below cost. To break even on a markdown, the extra volume of units sold must offset the lower margin per unit: break-even units = original profit per unit / new profit per unit x original volume.
Typical retail markdown ranges
| Markdown range | Common use case | Typical goal |
|---|---|---|
| 5-15% | Early promotional event | Drive trial, reward loyalty |
| 20-30% | Mid-season clearance | Accelerate sell-through |
| 30-49% | End-of-season sale | Clear slow-moving inventory |
| 50-60% | Closeout or final sale | Recover cost, free shelf space |
| 60%+ | Liquidation or distressed stock | Minimize loss on dead inventory |
Common markdown tiers used in retail merchandising. Actual strategy varies by category and margin.
Frequently asked questions
What is the markdown formula?
The standard formula is: Sale price = Original price x (1 - Markdown% / 100). Equivalently, Dollar savings = Original price x (Markdown% / 100). To express a known price reduction as a percentage: Markdown% = (Original price - Sale price) / Original price x 100.
How is markdown different from discount?
The terms are often used interchangeably by consumers, but in retail accounting they differ. A discount is a reduction given to a specific customer or channel (trade discount, quantity discount, coupon) and may not change the official list price. A markdown is a formal change to the tagged retail price that applies to all buyers. Both reduce the amount paid, but markdowns affect recorded retail inventory value while discounts may be tracked separately.
Can a markdown exceed 100%?
No. A markdown is bounded between 0% and 100% of the original price. A 100% markdown would mean giving the item away for free. If you see language like "110% off," it typically refers to a rebate or credit exceeding the purchase price, which is an additional incentive on top of a price reduction, not a markdown in the standard sense.
How do I find the original price from a sale price?
Use the Reverse mode in this calculator. The formula is: Original price = Sale price / (1 - Markdown% / 100). For example, if a sale price is $75 after a 25% markdown, the original price was $75 / 0.75 = $100. This is useful for verifying advertised discounts or reconstructing a tag price.
What is a good markdown percentage?
There is no universally "good" markdown percentage; it depends on your margin and inventory goal. A 10-15% markdown is a light promotional nudge. A 30-50% markdown signals a serious clearance push. Above 50% is often liquidation territory. The key test is whether the post-markdown gross profit per unit is positive, and whether the expected sales lift justifies the margin compression.
How do successive markdowns compound?
Each successive markdown applies to the reduced price from the previous step. A 20% markdown followed by another 20% markdown produces a combined markdown of 36%, not 40%. The formula is: effective markdown = 1 - (1 - md1/100) x (1 - md2/100) x .... Use the Successive mode to calculate this automatically for up to three steps.