Why can fewer markdowns benefit a retail business?

Fewer markdowns can significantly benefit a retail business primarily by making inventory aging less of an issue. When a retailer marks down products, they typically do this to move inventory that has been on the shelves for an extended period. If markdowns are minimized, it indicates that the retailer is either pricing products appropriately from the outset or is successfully managing inventory levels and turnover.

Maintaining a lower level of markdowns helps keep the perceived value of products high, which can lead to greater customer satisfaction and retention. Additionally, when inventory does not age significantly, the business can mitigate losses associated with unsold items and create a healthier cash flow. This approach allows retailers to maintain their pricing strategies while reducing the impact of having older inventory that might otherwise need to be heavily discounted to sell. Thus, fewer markdowns can lead to improved profitability and a more robust inventory management strategy.