The Hidden Cost of Sub-Optimal Pricing

~2 minutes read

The Invisible Drain

Most commerce brands discount more than they need to—and still leave margin on the table. The leak isn’t obvious in any single promotion; it’s the insidious, slow drip of reactive markdowns, misaligned prices, and missed demand signals that compounds into significant losses over time.

Industry research consistently shows an aggregate ~12% annual revenue loss tied to markdowns and mis-pricing (Coresight, McKinsey, UpKeep, MakerSights, Avery Dennison, 2022–2023).

Why It Happens

• Over-reliance on markdowns → forced clearance and inventory waste.

• One-size-fits-all pricing → prices ignore SKU-level reality.

• Slow response to demand shifts → promotions when you shouldn’t; inaction when you should.

• Missed signals → valuable data exists, but fails to drive timely, informed decisions.

• Analytics overwhelm → insights remain trapped in dashboards, failing to translate into decisive action.

• No safe “sandbox” → teams lack the ability to test price moves and predict impact before launch.

How It Shows Up Week to Week

• Discount share relentlessly creeps up, while gross margin remains stubbornly flat.

• Your winning SKUs sell out prematurely post-promo—resulting in significant lost full-price revenue later.

• Aged stock accumulates, inevitably triggering painful end-of-season write-downs.

• Decision thrash becomes common: endless debates vs. clear data-driven choices, due to the inability to quickly preview potential impacts.

A 5-Minute Self-Check

Look back 30 days and jot down:

• % GMV sold under discount (“discount share”)

• Sell-through (30d) for your top/mid/bottom SKUs

• % units sold at full price vs. discounted

• Stockout risk on top sellers during promotional periods

• Refund rate & any spikes tied to recent markdowns

👉 If discount share is rising while margin is flat—and stockouts are hitting your top SKUs—you’re likely buying revenue today at tomorrow’s expense.

What “Better” Looks Like

• Markdown use becomes strategic, falling and precisely targeted.

• Prices accurately reflect inventory reality and true demand, not just the calendar.

• You consistently preview the impact of pricing moves before making them.

• Teams operate with a clear playbook: knowing precisely when to hold, when to nudge, or when to clear.

⚡ Even small, disciplined changes in pricing prevent costly leaks. The payoff compounds—just as the losses do.

References

• Coresight Research & Celect survey (via RetailDive/Toolio): Non-grocery retailers lose ~$300B annually (≈12% of revenue) due to markdowns. → toolio.com

• UpKeep Inventory Report: Only ~60% of stock sells at full price; ~40% is discounted, and ~50% of retailers blame inventory misjudgments. → upkeep.com

• MakerSights: Markdowns now represent ~40% of retail sales (up from 4% in 1980). → makersights.com

• McKinsey (2023): U.S. retailers’ inventories surged to $740B in 2022, requiring markdowns or storage. → mckinsey.com

• Avery Dennison “Missing Billions” (2022): Globally $163B of inventory is discarded yearly due to overproduction/expiry. → rfid.averydennison.com