Comparing Top Markdown Methods for Short Dated Inventory

When it comes to choosing how a store, or even if, a store should markdown products expiring soon, there are many options to choose from and factors to consider. Are your shoppers drawn by big savings, or is the focus more on an upscale shopping experience? How much product will need to be marked down in any given week? Will you use the same strategy across all departments, or vary it based on storage requirements? Just to name few.

We have had the pleasure of seeing countless strategies used throughout the years. Ranging from the notorious markdown carts to banana boxes filled with mystery buys. While there truly is no one right answer, we wanted to break down the top methods used today and their pros and cons.

Clearance Carts

The #1 complaint against clearance carts is they make a store look cluttered, or even cheap. These are most commonly placed near the checkouts, which leaves one of your shoppers’ final experiences with your store focusing on the “leftover.” Certainly not a high note.

That said, you can’t argue with the results. The combination of a deep discount and high visibility sells through even some of the slowest turning products.

Our recommendation – leave these carts for the occasional seasonal clearance product only. Shoppers almost expect to see them post-holidays, and it’s an easy way for your pricing team to place a set price sign on each cart and adjust all products within the carts to ring up at that price. Having carts with varying price products in them adds an extra layer of management and hassle since each product needs to be individually re-labeled.

Temporary Price Reductions (TPR)

Sale signs grab a shopper’s attention. If the discount is big enough, using TPRs is a great way to drive short-term sales life on specific products. But, implementing even a single TPR requires a series of steps that are likely not worth the benefit. The department makes a request to pricing. They print a tag and hang it as well as update the POS to the new price. Once the TPR expires, the sale tag has to be removed, and you may even need to audit the POS to ensure the regular price has been restored.

A big note of caution here as TPRs are only able to apply a discount to every item in inventory rather than the small subset that is actually short dated. Stores are then faced with a decision to take a hit on sale value for non-short date product, reduce the ideal discount amount so that the total reduction is split over all inventory, or spend additional labor monitoring the product to remove the TPR once all short-dated inventory has sold.

Our recommendation – use sparingly. Only on products that are being discontinued or have a significant number of items expiring soon.

Coupons

From Manager’s Specials, store clearance coupons, to our very own Stop Waste Together program, coupons create a visual draw to only the specific, individual products you are trying to clearance out. When coupons are designed and implemented appropriately, they can even be an effective extensive of your brand and customer experience. For stores serving a community that places a high value on preventing food waste, coupon and signage message promoting your efforts to prevent expired food can go a long way to offset any concerns about negative shopper perception towards coupons.

Whenever coupons are used, there must be additional consideration put into the design to avoid coupon fraud and tampering. Make sure you are purchasing labels that either shred or lose their adhesion when removed from the product.

Our recommendation – this is a great option. It keeps shoppers focused on products in the aisles rather than clearance sections and can be a great branding win. It can also easily be applied to all departments without the need for additional merchandising space.

Markdown Sections

A whole store expansion from the day-old bread racks, markdown sections work. Quite simply, we haven’t seen any other traditional strategy work as well at selling through clearance and short dated inventory. They are also easy to manage, as store staff only has to spot check that single area to ensure any non-sold and now expired items are removed.

The downside is it can become a destination for shoppers, where these deep discount items are bought instead of rather than in addition to items on their shopping list. When comparing the lost margin with the savings of recovered shrink, it is a small price to pay. Note that all product in markdown sections should be relabeled to a new, clearly visible price. Using coupons here won’t work since regular shelf price tags are not available to inform shoppers of final purchase price.

Our recommendation – these steal the show but do have limitations. While a store likely has room for a grocery markdown section, there may not be space available for additional markdown sections in the refrigerated and frozen departments. In that case, we suggest a combination of markdown sections for shelf stable products and coupons on cold products.

Download the impact of expired products on supermarket sales & shopping behavrior