Asset Turnover Ratio

Category: Sales.

Running a business is far from being as easy as it may seem, at first glance. This actually implies analyzing the performance level, in hindsight of different approaches and strategies. One of the ways in which you can analyze your firm’s performance level is by utilizing distinct calculating metrics and formulas, such as the % markdown goods.

To start with, a markdown good entails a listed price, which has been diminished. Even if this would mean that the overall value obtained through the sale of those specific goods decreases, the sales volume will be on the growth. So, why should you measure your company’s total amount of markdown sales? In essence, this metric allows your team to analyze the approximate revenue your firm generates during a timeframe.

For the most part, the percentage of markdown goods is calculated on a monthly basis.

Differences Between Markdown Goods and Discounted Goods

Let’s clear out some of the most commonly met misconceptions concerning markdown goods. For example, let’s say that you had a sweater for sale. Its initial price was of $100. After a month of slow sales, you choose to markdown the sweater to 20 percent off. At retail, it will cost $80. Evidently, you lose $20 per purchase; in spite of that, though, this will make the good more attractive to customers, thus, maximizing the number of sales.

That being said, a markdown price is usually the result of a low sales season. In some situations, though, you might be required to increase the discount to 30 percent or 40 percent. This should be usually decided in time, and you shouldn’t make rushed decisions. You might not want to postpone it too long, either, as you still want the product to be relevant to the season, market, so on and so forth.

On the other hand, though, a discount represents a price reduction in the original price of the item. Discounts are offered in order to create customer loyalty, amongst other things, but it is definitely an approach that has been proven to be widely effective – regardless of the industry in which you operate.
Many retailers want to avoid markdown at all costs – but this is, by far, an unattainable purpose, not to mention that it places a lot of pressure on the company/store.

So, what should you do with the information obtained after calculating this percentage? You should determine whether your approach still generates profit, or you are forced to sell a significant amount of your merchandise at a notably lower price. If you have sold a critical number of markdown goods during a specific timeframe, this could detrimentally impact your total amount of earnings. What does this ask for? It’s pretty clear, there is something you should do in order to solve the problem. Wanting to avoid markdown goods is nearly impossible but having a really high number of markdown goods isn’t a healthy approach either. Attaining balance in this respect is always best. A KPI target in this realm would be to have a 16 percent of markdown goods.

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