How this instrument works
A markdown is a change to the price itself — the store lowers the number on the tag or the shelf label, and that lower figure becomes the price everyone pays from that point on. This is different from a coupon or a promo code, which subtracts at the register without touching the tag and usually expires. The arithmetic is one multiplication: keep the fraction of the price the markdown leaves behind, one minus the percentage over one hundred, and multiply the original figure by it. A 25% markdown keeps 75% of the tag, so final = original × 0.75.
Retail buyers plan markdowns on purpose, not as an afterthought. A garment that isn't selling through fast enough gets a first markdown — commonly 20% to 30% — a few weeks before a season ends, then a second, deeper cut of 50% or more if it still hasn't moved by clearance. Each new percentage applies to the price the item is already carrying, not the original ticket, which is why a rack marked '60% off' after an earlier 25% cut is not an 85% saving against the first price — it's 60% off the already-reduced number. Some supplier contracts even include a markdown allowance, reimbursement a vendor pays the retailer to help absorb margin lost to an unplanned cut; the term shows up on invoices long before it shows up on a shelf sign.
This sheet computes one cut against one starting price and stops there. It carries no sales tax, no vendor allowance, no second or third reduction layered on top, and no view of what the item cost the retailer to buy — a markdown is measured against the price on the tag, never against cost, which is the arithmetic markup and margin calculators handle instead. Treat Final price as the new shelf figure a single planned reduction produces, and work out anything stacked on top of it separately.
- Type the current shelf figure into Original price, $ — the price before this cut.
- Set Markdown, % to the percentage the store is taking off — 25 for a quarter, 60 for a deep clearance cut.
- Read Final price for the new shelf price after the reduction.
- Check Amount saved for the dollar figure removed; it always equals Original price, $ minus Final price.
Worked example — a $100 item marked down 25%
A shelf tag reads $100 and a clearance sign says 25% off. The fraction the markdown leaves behind is 1 − 25 ⁄ 100 = 0.75, so Final price comes out to 100 × 0.75 = $75.00 — the new number that replaces the old one on the tag. Amount saved is the other slice, 100 − 75 = $25.00, and the two figures always add back to the original $100.
This is the plainest version of the calculation on the site: one price, one cut, no coupon layered underneath and no second reduction compounding on top of the first. A shopper reading that $75 tag is looking at the actual price the item now carries — not a temporary register discount that reverts once a code expires, and not a margin figure a buyer is tracking against cost. It answers exactly one question: what will this item actually cost at the register right now.
Questions
What's the difference between a markdown and a discount code?
A markdown changes the price itself — the store lowers the tag or shelf label, and that lower figure is what every shopper pays until it changes again. A discount code or coupon subtracts at the register without touching the tag, usually applies to one purchase, and often expires. A marked-down item can still have a coupon applied on top of it at checkout; the two are separate cuts on separate mechanisms.
Why do stores mark an item down more than once?
Because one cut often is not enough to move stock before it goes stale. A typical first markdown runs 20% to 30% a few weeks before a season ends; if sell-through is still behind target, a second, deeper cut of 50% or more follows at clearance. Each new percentage applies to the price the item is currently carrying, not the original ticket — a second '50% off' compounds against the already-reduced price rather than restarting from the top.
What is a markdown allowance or 'markdown money'?
It's reimbursement a supplier pays a retailer to help absorb the margin lost to an unplanned price cut, often negotiated into a vendor contract before the season starts. It shows up on invoices and trade paperwork, not on the shopper-facing tag, and it has no bearing on the arithmetic this sheet runs — Final price and Amount saved describe the tag alone, whoever ends up covering the difference behind the scenes.
Does Final price already include sales tax?
No. This sheet applies only the percentage in Markdown, % to the figure in Original price, $ — the shelf price change a store makes, not a register total. Sales tax is calculated on whatever price is showing at the point of sale, which for a marked-down item is the reduced figure, but the tax itself is layered on afterward by the till, not by this arithmetic.
Can Amount saved be zero or negative?
It can be zero — a Markdown, % of 0 leaves Final price equal to Original price, $ and nothing is saved — but it cannot go negative under normal use. The field is capped below 100%, since a full markdown would already make the item free; anything higher would mean being paid to take it away, which is a different transaction than a price cut.
References
- FTC — Guides Against Deceptive Pricing, 16 CFR Part 233
- U.S. Small Business Administration — pricing and marketing guidance
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.