I was talking to a vendor's rep this month and from what he told me, there are a number of retailers who are not calculating their markdown percentage correctly! Everyone needs to know the correct method. It is to take the markdown dollars (the difference between the original retail and the selling price) and divide it by the selling price.
When you put something on sale in your store and put a sign out for your customers that it is 40% off - THAT IS NOT A 40% MARKDOWN!! For you, the retailer, it is actually a 66.67% markdown.
EXAMPLE: Using an original retail of $100 for ease in calculations, a 40% off price for the customer would be a retail selling price of $60. The markdown is $40. Therefore, to calculate the markdown percent you take: $40 divided by $60 (the selling price) and get 66.67%, not 40%.
Using the same original retail of $100 and 50% off for the customer, the selling price is now $50 and the markdown dollars are also $50. That means the markdown percent is 100.00%. That's quite a difference! I hope you have been calculating your markdown percentages correctly. If not, now you know and we will all be on the same page.