Clearance Conundrum – Retail Clearance Sale Strategies

To the retail trivia experts out there, what is the difference between sales and clearance?

• Sales – Offering a discount or promotion for a specific event or brand.
• Clearance – Tactic used for the permanent removal of merchandise that did not sell.

At its core, clearance is the solution to merchandise bets that didn’t pan out as planned. Do retailers want to offer clearance events? Not particularly!

After all, a retail clearance sale is an indictment of business decisions that went awry. Retailers want to believe that they can get back what they paid in inventory and prove the return on investment.

But that thought process leads to a further depreciation of money. Clearance is the reality of being in retail, with some retailers accounting for 13% of revenue from clearance.

We’ve established that clearance isn’t a retailer’s favorite tool to pull out of the tool belt, but it is necessary at times. So, if you’re going to use it, you might as well do it as efficiently as possible. This is our team’s distilled approach to doing a retail clearance sale correctly.

1. Conduct a “clearance audit” – This is the starting line. A few questions to ask at this

stage include:

• What inventory do you have available that should be included?
• How is your clearance section set up today? What’s working? What’s not?
• How are you tracking the effectiveness of your discount cadence?

That’s a subset of what is a lengthier process, but you get the point. It’s about understanding your current state and forming hypotheses of how your clearance sale strategy could be done better.

2. Test, test, and test again – You remember middle school science? It’s kind of like that. 

You build hypotheses, and then you run clearance experiments to see what works. This includes different visual merchandising setups, discounting cadences, store-specific strategies, etc. You might find that stores in the northeast should increase their markdowns from 30% in Week 1 to 50% in Week 2, but in the south, you don’t need to discount as steeply week by week because clothes remain in season longer.

The point of each test? Gather data and become smarter than you were before. The only way a test “fails” is if you can’t identify what you learned from the test.

3. Optimize and empower – Alright, you’ve taken a realistic look in the mirror, identified

some areas where you need to improve, and have taken steps to make that a reality. Once you have a good grasp on at least a few tactics that can work fleet-wide, it’s time to roll out your inventory clearance sale across all your stores. When one says “operational excellence,” it’s the ability to do simple (but powerful) things at scale.

It’s not easy, but like the above, if you plan your retail clearance strategies with mechanisms built in to track, success is right around the corner.