Page 167 - DMGT550_RETAIL_MANAGEMENT

Retail Management

Notes Markdown does not always mean that the store is not performing wall, this is a part of doing
business and running a retail store efficiently. Sometimes, initially some retailers markup their
merchandise high enough so that after reductions and markdown the planned maintained markup
is achieved. Thus, a retailer’s intentions should not be to reduce markdowns. If markdowns are
too less, it may mean that the retailer is probably charging too low for the merchandise, not
purchasing in bulk or not having interest in purchasing a particular merchandise.

Types of Markdowns

The various types of markdown of price are:
1. Temporary markdown: This is a policy of reducing the prices of merchandise for a particular
time period due to a particular reason, e.g. markdown because of clearing-out shopworn/
substandard merchandise. Once such merchandise is sold, the product will be sold at the
normal selling price.
2. Permanent markdowns: In such markdowns price reduction is made for comparatively
longer periods, maybe a few weeks, few months or more. Unlike temporary markdown,
where price reduction takes place for a particular cause and price is eventually raised to
the original one, permanent markdown is used to replace the old-quality merchandise
with the new one. The reasons for permanent markdown are:
 Merchandise if of perishable nature and will be of no use after some time.

 Old technology goods are to be replaced with latest versions.
3. Seasonal markdowns: Under such markdowns, prices are reduced to clear out seasonal
retail merchandise. ‘Ludhiana woollen sales’, for example, in the previous winter season
are very common in North Indian states like Haryana, Punjab, Delhi and Western UP etc.

Markup

Unlike markdown where prices are reduced, additional markup is intended to increase the
retail price above the original markup due to certain reasons like:

1. When the demand for merchandise offered is exceptionally high.
2. There is a monopoly-like situation.
3. When competitors are not able to meet the consumer’s demand.
4. In case private labels are performing well in retail market and have good demand and the
retailer likes to have quick returns.
“In today’s world of retailing where brands are easily available and competition is becoming
tougher, markdowns are increasingly applied by Indian as well as global retailers rather than
markups.”
Besides markdowns and additional markups, a third price adjustment, employee discount is
becoming popular in the retail world. Some retail firms, in order to build public image and
employees welfare provide additional benefits to their employees besides normal salary and

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