# Retail markdown calculator

Test a proposed selling price against the original price and unit cost. The calculator shows the reduction and the change in gross margin percentage; it cannot forecast how much extra demand the new price will create.

Formula: Price reduction = (original price − new price) ÷ original price × 100.

Example: Original selling price 100; New selling price 80; Unit cost 50.
Result: Price reduction 20.0%; Original gross margin 50.0%; New gross margin 37.5%.

## How to calculate it

1. Enter the original and proposed selling prices on the same tax basis, plus the relevant unit cost.
2. Calculate the price reduction as the difference between prices divided by the original price.
3. Compare gross margin at each price. Then estimate whether additional sales, clearance value or avoided holding costs justify the lower profit per unit.

## A 20% cut changes margin more than 20%

An item priced at $100 costs $50. A proposed $80 selling price is a 20% reduction. Gross profit falls from $50 to $30 per unit, and gross margin falls from 50% to 37.5% of selling price.

To preserve the same $500 gross profit from ten full-price sales, the retailer would need about 17 sales at the new $30 unit profit, assuming the same cost and no other effects. Treat that as a break-even test of the price, with demand still to estimate. Check the remaining season and whether the cut takes sales from another line.

## Check before acting

- Compare prices and unit cost on a consistent tax, discount and returns basis.
- Check whether a markdown clears slow stock or only reduces margin on units that would have sold anyway.

## Questions

### Is markdown percentage the same as margin loss?

No. Markdown percentage measures the price cut against the original price. Margin percentage uses gross profit divided by the selling price, so it changes differently.

### Can this calculator predict sales uplift?

No. It shows price and unit-margin arithmetic. Estimate uplift from comparable tests, timing and the stock you need to clear.

### What if the new price is below unit cost?

The result will show a negative gross margin. Check whether clearance, disposal or another commercial constraint makes that deliberate before committing the price.

[Use the interactive calculator](https://twelfth.ai/tools/markdown).
[Download the markdown CSV template](https://twelfth.ai/resources/retail-csv/markdown.csv).
[Download the eight-tab workbook](https://twelfth.ai/resources/retail-metrics-template.xlsx).
[Read the markdown glossary definition](https://twelfth.ai/glossary/markdown).
Related calculators: [Sell-through calculator](https://twelfth.ai/tools/sell-through), [GMROI calculator for retail inventory](https://twelfth.ai/tools/gmroi).
Source: https://twelfth.ai/tools/markdown