A clearance pricing strategy starts with a cash target and a hard end date. Sort the stock into aging buckets, cut older buckets deeper, and keep every price above its floor: the best cash available elsewhere. Schedule the second cut and the exit to a liquidation buyer before the event opens.
I think of a clearance event as the one week a year the back room gets emptied on purpose. The rest of the year, stock leaves it one sale at a time, at whatever price the tag happened to say.
Cash Margin Partners is an inventory cash-recovery practice for independent, owner-operated retailers. We show owners how much cash sits trapped in unsold inventory, then give them a prioritized plan to get it back.
What You Need Before You Start Pricing a Clearance Event
Before you set a single price, you need five fields per candidate SKU. They're units on hand, unit cost, current price, receipt date and last sale date. A missing cost is a blank to fill from the invoice, never a zero.
Beyond the export, gather four things before you open a spreadsheet:
- Written per-unit quotes for your oldest stock from a liquidator or closeout buyers that work with independent retailers.
- Your monthly rent and the square footage the clearance stock occupies, on the floor and in storage.
- The date the next season's receipts land and the date their invoices come due.
- The price history for anything you plan to tag with a former price.
The export is the slow part. Your POS probably exports item-level reports, but stitching cost, receipt dates and sales history into one sheet can eat an evening.
To skip that, a free workspace builds the list from a read-only Shopify or Square connection, or from a spreadsheet upload. Lightspeed Retail X-Series connects through a capacity-managed custom app that may pause new connections, so availability depends on workspace eligibility. Direct availability depends on production launch status and workspace eligibility; compatible item-level exports remain available after column review.
Key data point
U.S. retailers held $839.0 billion in inventories at the end of July 2026, per the Census Bureau's September 16, 2026 release. That's up 3.9% from July 2025, seasonally adjusted.
The retail inventories-to-sales ratio was 1.27, meaning stores held about 1.27 months of sales on hand.
The 8 Steps to Price a Clearance Event
Every worked figure below comes from one illustrative store. Take a hypothetical 1,400-square-foot outdoor apparel and gear shop in a ski town, paying $8,400 a month in rent.
Its winter stock has to clear before spring receipts land on March 1. The store and every number attached to it are invented for teaching, and none of it comes from client data.
Step 1: Set a Cash Target and a Hard End Date
Every clearance event needs two numbers before any tag changes: the cash it has to raise and the date it stops. Without an end date, a clearance price turns into the store's new regular price.
Illustration: the outdoor shop owes a $5,000 balance on its spring order on March 10. The owner sets a $5,000 target for clearance sales and runs the event from February 14 to February 27.
Floor space supplies the urgency. The clearance rails take 140 of the shop's 1,400 square feet, so they carry about $840 of the monthly rent.
That $840 is what the back room charges every month to hold stock nobody has bought. The end date is the day the charge stops.
Step 2: Pull Every Candidate SKU With Cost, Price and Dates
Export every candidate SKU with units on hand, unit cost, current price, receipt date and last sale date. Start from the full catalog so items with zero sales still appear.
Sales reports tend to drop items that never sold, which is why the catalog comes first. Our guide to finding dead stock in Shopify covers that gap on one platform in detail.
| Line (illustration) | Units on hand | Unit cost | Current price | Days on hand | Last sale |
|---|---|---|---|---|---|
| A. Insulated jackets | 24 | $90 | $200 | 75 | 9 days ago |
| B. Merino base layers | 60 | $28 | $70 | 140 | 30 days ago |
| C. Hats and gloves | 150 | $9 | $24 | 200 | 45 days ago |
| D. Last season's snow boots | 18 | $60 | $140 | 400 | 120 days ago |
A real export would hold dozens of size and color variants per line. The illustration groups them into four lines so the math stays readable.
The four lines hold $6,270 at cost and $15,120 at current prices. That gap is what the tags promise, and only part of it will turn up as cash.
Step 3: Sort the Candidates Into Aging Buckets
An aging bucket is a band of days on hand since receipt, such as 61 to 120 days. Put every candidate in a bucket, because the bucket sets its opening markdown depth in step 5.
Use the last sale date as a cross-check. Slow-moving inventory still sells, just below the rate that justifies its space. Dead stock has no verified sales over the window you're measuring.
| Line (illustration) | Days on hand | Aging bucket | Status from last sale |
|---|---|---|---|
| A. Insulated jackets | 75 | 61 to 120 days | Selling, but the season ends |
| B. Merino base layers | 140 | 121 to 180 days | Slow-moving |
| C. Hats and gloves | 200 | 181 to 365 days | Slow-moving |
| D. Last season's snow boots | 400 | Over 365 days | Near dead, one sale in four months |
Anything under 61 days on hand stays out of the event. Stock that new still has its full-price window, and discounting it teaches customers to wait.
Our sibling guide on how to run an inventory aging report shows how to build these buckets from a raw export.
Step 4: Find Each Line's Floor Before You Set Any Price
The floor is the most cash you could get for an item without a clearance event, net of freight and fees. It usually comes from a written closeout or liquidation quote, a return-to-vendor credit, or the value of packing the item away.
Unit cost makes a poor floor. That money left the account when the invoice was paid, and no price you set now brings it back.
| Line (illustration) | Floor per unit | Where the floor comes from | Floor value of the line |
|---|---|---|---|
| A. Insulated jackets | $30 | Assumed closeout quote, net of freight | $720 |
| B. Merino base layers | $10 | Assumed closeout quote, net of freight | $600 |
| C. Hats and gloves | $2 | Assumed closeout quote, net of freight | $300 |
| D. Last season's snow boots | $15 | Assumed closeout quote, net of freight | $270 |
Selling all four lines to the closeout buyer today would raise $1,890. Every clearance price has to beat that by enough to cover two weeks of floor space and staff time.
Our comparison of markdown vs liquidation walks through the cases where the floor offer wins outright. Count every fee in the net floor, whichever channel the quote comes from.
Store example
Illustration: packing the 24 jackets away until October would keep them on a back-room shelf for eight months. At 12 square feet and $6 a square foot, that's $576 in rent share before the first one sells. They'd also return as last season's colors.
Step 5: Set the Opening Markdown Depth by Aging Bucket
Opening markdown depth should rise with the aging bucket, so the oldest stock takes the deepest first cut. Write the ladder down before the event and apply it line by line.
| Aging bucket | Opening depth (illustration) | Second-cut depth (illustration) |
|---|---|---|
| 61 to 120 days | 25% off | 40% off |
| 121 to 180 days | 35% off | 50% off |
| 181 to 365 days | 50% off | 65% off |
| Over 365 days | 60% off | 75% off |
These percentages are my illustration for this one store, and they're no industry benchmark. Our list of 9 markdown tactics that move dead stock suggests a 20% to 30% first cut for routine markdowns. The deeper rungs here reflect stock that's already missed that window.
| Line (illustration) | Opening price | Margin per unit | Floor | Cash above floor per unit |
|---|---|---|---|---|
| A. Jackets at 25% off $200 | $150.00 | $60.00 | $30 | $120.00 |
| B. Base layers at 35% off $70 | $45.50 | $17.50 | $10 | $35.50 |
| C. Hats and gloves at 50% off $24 | $12.00 | $3.00 | $2 | $10.00 |
| D. Boots at 60% off $140 | $56.00 | Minus $4.00 | $15 | $41.00 |
The boots sell $4 below cost at $56, yet they clear the floor by $41 a pair. The price stands.
"Sell boots below cost? I paid $60 a pair." You did, a year ago, and that $60 is spent whichever way this goes. The live question is whether $56 beats a $15 quote, and it does by a wide margin.
The classic promotion test divides original margin by original margin minus the discount. For the jackets, a 55% margin at 25% off gives 55 divided by 30, or 1.83. The line needs 1.83 times its full-price unit volume to hold margin dollars.
That test belongs to promotions on items still selling at full price. Clearance stock already failed it, so test each price against the floor instead.
Step 6: Round the Prices and Set a Lawful Compare-At Price
Round each opening price down to a clean ending, then record the former price you plan to show. That former price has to be one the item was openly offered at for a reasonably substantial period.
Illustration: the base layers land at $45.50 after 35% off. Rounded down to $45, the cut becomes 35.7%, and the tag reads cleaner at the rail.
The federal standard sits in the FTC's guides on former price comparisons at 16 CFR 233.1, current as of October 9, 2026. The former price must be the bona fide price the item was regularly offered at for a reasonably substantial period.
Operator tip
Never raise a price in the weeks before a clearance event to make the discount look deeper. Under 16 CFR 233.1, an inflated former price makes the advertised bargain false, and some states add stricter rules on top.
In Shopify, enter the original price in the Compare-at price field and the clearance price in the Price field. Shopify's help center notes the compare-at value must be higher than the price for the sale to display.
In Square, an automatic discount can target individual items or categories and run on a set date range. Square's support center says category-based automatic discounts can't apply to websites or online ordering, so pick individual items if you sell online.
Step 7: Schedule the Second Cut and the Exit Before Day One
Decide the second-cut trigger, the second-cut depth and the exit date before the event opens. A decision made on day 8, in front of a full rail, tends to run on hope.
Illustration rule: any line under half sold by close on day 7 takes its second-cut depth on day 8. Whatever remains after day 14 goes to the floor buyer on day 15.
Applied to the outdoor shop, the jackets sold 13 of 24 units in week one, or 54%, so they hold at $150. The other three lines sold under half and take the second cut.
- Base layers drop from $45 to $35, which is 50% off $70.
- Hats and gloves drop from $12 to $8, rounded down from 65% off $24.
- Boots drop from $56 to $35, which is 75% off $140.
A clearance event squeezes into two weeks the cadence that our ultimate guide to markdown cadence spreads across a season. Book the buyer's day-15 pickup now, because a scheduled truck is what keeps leftovers from walking back into the back room.
Step 8: Project the Event's Cash and Compare It to the Target
Project cash line by line: opening-price sales, plus second-cut sales, plus leftovers at the floor. Then compare the total to the cash target and to the liquidate-today figure.
Illustration for the jackets: 13 units at $150 brings $1,950 in week one. Another 6 at $150 brings $900 in week two, and 5 leftovers at the $30 floor bring $150, for $3,000 in total.
Across all four lines, the projection reaches $5,885 in event sales and $580 at exit. That's $6,465 against a $5,000 target and a $1,890 liquidate-today figure.
The sell-through assumptions here are invented for the illustration. With enough sales history and cost data, CMP estimates 30, 60 and 90-day cash-at-risk ranges. That gives you a model's projection in place of a guess. Forecasts and predictive alerts require a recent successful supported live connection and sufficient history and cost evidence; model projections are not guarantees.
A Worked Example End to End: One Hypothetical Shop's February Clearance
The full illustration below runs the outdoor shop's four lines through all eight steps. Every unit count is an assumption chosen for teaching, and a real store's sell-through will differ.
| Line (illustration) | Opening price | Week 1 units | Week 1 cash | Day 8 price | Week 2 units | Week 2 cash | Units at exit | Exit cash | Total cash |
|---|---|---|---|---|---|---|---|---|---|
| A. Jackets | $150 | 13 | $1,950 | $150 (held) | 6 | $900 | 5 | $150 | $3,000 |
| B. Base layers | $45 | 22 | $990 | $35 | 18 | $630 | 20 | $200 | $1,820 |
| C. Hats and gloves | $12 | 50 | $600 | $8 | 45 | $360 | 55 | $110 | $1,070 |
| D. Boots | $56 | 5 | $280 | $35 | 5 | $175 | 8 | $120 | $575 |
| Total | 90 | $3,820 | 74 | $2,065 | 88 | $580 | $6,465 |
Week one brought in $3,820, or 76% of the $5,000 target. The day-7 review caught three lines selling under half their units and cut them, and week two added $2,065.
Event sales closed at $5,885, which cleared the target by $885 before the exit truck arrived. The 88 leftover units then went to the closeout buyer for $580.
The Margin Was $195. The Cash Was $6,465.
Measured at cost, the event barely moved the profit and loss statement. The pool cost $6,270 and brought in $6,465, a $195 gross margin before staff time and signage.
Measured in cash, the event raised $4,575 more than selling everything to the closeout buyer on day one. That gap paid the spring balance with room to spare.
In this illustration, the jackets carried the margin. The hats, gloves and boots sold partly below cost and converted back to cash at prices the floor made worthwhile.
Key insight
The number that decides this illustration is $4,575, the gap between running the event and liquidating on day one. To size the cash sitting in your own aging stock, start with the free trapped-cash estimate. This directional questionnaire gives a benchmark range; use a supported connection or reviewed item-level upload for SKU-level analysis.
Common Mistakes at Each Step of a Clearance Event
Each step has a typical failure, and the fix is usually a rule written down in advance.
| Step | Common mistake | What to do instead |
|---|---|---|
| 1. Target and end date | Running clearance with no end date, so the sale price becomes permanent | Set the stop date and the exit date before any tag changes |
| 2. Candidate list | Treating a missing unit cost as zero | Fill the cost from the invoice, or hold the item out until you can |
| 3. Aging buckets | Bucketing by last sale date alone | Bucket by days on hand and use the last sale date as a cross-check |
| 4. Floor | Using unit cost as the floor | Get a written per-unit quote and treat that as the floor |
| 5. Opening depth | One flat percentage across the whole store | Set depth by bucket, with the oldest stock cut deepest |
| 6. Tags | Raising prices before the event to inflate the former price | Show only a price the item carried for a substantial period |
| 7. Second cut and exit | Deciding the second cut on day 8 by feel | Write the trigger, the depth and the exit date before day one |
| 8. Projection | Comparing the event to full price and calling the discount a loss | Compare projected cash to the target and to the liquidate-today figure |
Step 8 is the mistake I'd fix first. Compare clearance prices to the original tag and every cut feels like a loss. That feeling pushes the second cut later than it should go.
How to Check Your Clearance Pricing Before the Tags Go Up
Run five checks on the finished price list before the event opens. Each one catches a different error.
- Confirm every clearance price sits above its line's floor. In the illustration, the thinnest gap is $6 a unit, on hats and gloves at $8 against a $2 quote.
- Reconcile units. Event units plus exit units must equal units on hand, and the illustration's 90 plus 74 plus 88 makes 252.
- Match each former price to a price the item carried openly for a substantial period, and keep the record.
- Ring up one item from each line at the register, and check the online store too if you sell there.
- Re-run the projection with sell-through 30% lower than your assumption.
In the illustration, cutting every sold-unit count by 30% drops event sales to about $4,120. That misses the $5,000 target, though the exit buyer still takes the extra units at floor prices.
If the low case misses your target, decide now whether to widen the event or plan around the gap. Finding out on day 14 leaves you fewer options and a fuller back room.
Where Cash Margin Partners Fits in Clearance Pricing
Cash Margin Partners helps organize the inventory and sales evidence for steps 2 and 3 through a supported read-only connection or reviewed spreadsheet upload. Obtain and review the written liquidation and return-to-vendor quotes in step 4 yourself. The software classifies eligible SKUs as dead stock, slow mover, overstock, stockout risk, healthy active or data incomplete.
From there, CMP writes a recovery plan with markdown sequences and bundling moves, and ranks recovery outcomes by expected cash and time-to-cash. Supported connections are listed on the integrations page.
When the markdown math stops beating the floor, CMP Exchange lists the remaining lot to participating buyers. The software is free, and CMP earns a 20% fee on matched liquidation sales, paid only after the seller is paid. CMP Exchange availability and transaction handling follow its published seller terms.
CMP has two limits you should know up front. The analysis is only as good as the cost and sales history behind it. And a 20% fee on a large liquidation lot is real money, so a direct broker may cost less at volume.
Start Here
- Today, export units on hand, unit cost, current price, receipt date and last sale date for everything older than 60 days.
- Ask one liquidator or closeout buyer for a written per-unit quote on your oldest bucket.
- Write your bucket ladder, second-cut trigger and exit date on one page before you touch a tag.
- Pull the price history behind every former price you plan to show.
- Book the exit pickup for the day after the event ends.
If you'd rather start from the numbers than the spreadsheet, open a free workspace and connect your store. No card and no time limit apply.
Frequently Asked Questions
What clearance markdown percentage should I start with?
Start with a percentage tied to the item's aging bucket, deeper for older stock. In this article's illustrative ladder, 61 to 120-day stock opens at 25% off, and stock over a year old opens at 60%. Those figures are an illustration for one hypothetical store, so check every opening price against the item's floor before you use it.
Is it OK to price clearance below cost?
A clearance price below cost is fine when it beats the item's floor, the best cash available another way. The unit cost was spent when the invoice was paid, so the live comparison is clearance price against floor. How a below-cost sale or an inventory write-down is treated for tax is a question for your accountant.
How long should a clearance event run?
A clearance event should run long enough for one scheduled second cut, and end before the next season's receipts land. This article's illustrative event runs 14 days. It reviews sales on day 7, takes the second cut on day 8 and exits on day 15.
How do I set a lawful was price on clearance tags?
Show a former price only if the item was openly and regularly offered at that price for a reasonably substantial period. That standard comes from the FTC's guides against deceptive pricing at 16 CFR 233.1. Some states add their own rules, so check yours before printing tags.
When should I stop marking down and liquidate instead?
Stop marking down when the next cut would push the price toward the floor, or when the event's end date arrives. Set that exit rule before the event opens, and book the buyer's pickup for the day after it closes.
How is end of season sale pricing different from a routine markdown?
End of season sale pricing works to a fixed deadline, usually the date new receipts land. A routine markdown follows a cadence across the whole season. A clearance event compresses that cadence into a week or two, with deeper cuts and a planned exit for whatever remains.