Legal Definitions - markdown

A markdown refers to a reduction in the original or current selling price of a product or service. Businesses often implement markdowns to encourage sales, clear out inventory, or respond to market competition.

• Example 1: Retail Inventory Clearance

  A bookstore has a large quantity of a particular novel that isn't selling as quickly as anticipated. To make space for new releases and recover some of its investment, the store decides to lower the price of that novel from $25 to $15.

  Explanation: The $10 decrease from the original selling price of the novel is a markdown, strategically used to move stagnant inventory and free up shelf space.

• Example 2: Real Estate Market Adjustment

  A commercial property owner initially lists an office building for lease at $50 per square foot. After several months with no interested tenants due to a downturn in the local economy, the owner reduces the asking lease price to $40 per square foot to attract businesses.

  Explanation: The reduction of $10 per square foot in the lease price for the office building is a markdown, reflecting an adjustment to market conditions to secure a tenant.

• Example 3: Service Promotion

  A software company launches a new subscription service for graphic designers, initially priced at $99 per month. For the first three months, they offer a special introductory rate of $69 per month to new subscribers.

  Explanation: The temporary reduction from $99 to $69 for the initial months of the subscription service constitutes a markdown, designed to entice new customers to try the product.