The standard for discounting is an attempt at a mulligan. You bought this product and the demand for it is not in line with it's MSRP, so you want to increase the chances of retrieving your locked up cash by reducing the sale price of the item. This is normally a reactive play after a gut instinct buying decision didn't work the way you expected. This reactive discounting normally happens once the potential margin is already gone.

​

Here's another scenario though, you buy a number of products and in doing so have set a selling plan wherein you have worked out the lifespan for a healthy profit at 45 days, a moderate profit at 46-75 days, and a poor profit at 76-85 days. (See the Inventory Decay Tool for more information here). So let's say you hit 40 days in and realize your sell thru is only 30%, and you decide to run some sort of discounting promotion to move that product while you still have some of the margin to work with. This is proactive course correction; you look ahead with the data you have and realize that you are off course from where you projected. So rather than wait to fix the problem later, you take steps to mulligan now while erosion is minimal.

How about one more scenario. Let's say you are mid season and the weather in your area has been unseasonably wet, you've done weekly replenishments of fenders and wet lube because the stock is moving so well. This is a good problem to have and stock turn is relatively high for this product. You check the weather and realize that the outlook is the same for weeks to come. You go to your supplier and negotiate a discount for ordering a good deal more than your normal replenishment order. Because your sell thru is sitting at such a high percentage and rider tolerance of the rain is holding steady - you build a strategic promotion around discounting a hot item. So you buy 3x the normal amount, and you run a promotion for 20% off of a "Ride yours while the rain pours" wet weather kit for two weeks. You maintain a strong margin because of the supplier discount, and you make a quick ROI on a significant investment based on sound data at your disposal.

​

​