Aged inventory and floor samples: when to mark down

A red clearance tag can be generous on one floor sample and painful on another. Say two sofas each carry a $3,000 ticket. A 40% markdown makes each $1,800, but the first landed at $1,350 and the second at $2,100. The same sticker leaves very different results.

For this illustrative clearance review, work from the cost and the piece's future job before picking the percentage. The first sofa leaves $450 in gross profit, or a 25% gross margin. The second loses $300, a negative 16.7% gross margin. Neither result is visible from “40% off” alone.

Age the piece without confusing age with usefulness

Receipt date gives a sample a starting age. Condition, current availability, and the sales it helps generate determine whether that age is a problem. A sofa that still sells a steady run of custom orders can earn its place long after a discontinued occasional chair has stopped helping anyone choose.

Set review buckets that fit your buying cycle. For the example store, use 0–90 days, 91–180 days, 181–365 days, and more than 365 days, then review the list monthly by vendor. These are proposed working buckets, not industry standards. Record both the unit's receipt date and the date it went onto the floor if those differ.

Give each bucket a question. Is a recent arrival getting a fair display? Does an older piece need a better position or different accessories? Is a long-standing sample still supported by current fabrics and vendor stock? A discontinued program needs a decision even if its sample is young.

The occasional chair does not get tenure merely because everyone has learned to walk around it. But an older display should not be cleared just to make an aging column look younger.

Decide whether you are retiring a unit or a program

Selling the sample and dropping the vendor program are separate decisions. You might replace a worn sample with a fresh one because the model sells well. You might keep a sound sample briefly while arranging its successor. Or you might retire the entire program because it produces little useful business.

Review the orders the display influenced, the gross profit those orders produced, and the stock investment supporting them. Include cancellations, service trouble, and the effort needed to keep the program accurate. A handsome vignette that creates repeated fabric substitutions is asking the sales team to do extra work.

The GMROI guide gives the fuller comparison: gross profit divided by average inventory at cost for the same period. Compare vendors on consistent periods and include the stock needed to support their sales. Keep sample age alongside that analysis; it cannot replace it.

Calculate the markdown from the dollars you need

Use landed cost as the starting point for the clearance calculation. The vendor's invoice leaves out charges that may materially change the result. Freight, duty, and brokerage can make apparently similar pieces very different candidates for the same promotion. The landed-cost guide explains how those charges belong with the merchandise.

Gross profit is selling price minus landed cost. Gross margin is that gross profit divided by selling price. A markup uses cost as its denominator instead, which is why asking for “a 20% margin over cost” invites a misunderstanding. Name the calculation when a manager approves a price.

Suppose the manager wants a 20% gross margin on Sofa A. Divide $1,350 by 0.80 to get a $1,687.50 selling price. Adding 20% to cost produces $1,620, which leaves a lower gross margin. Start with the desired dollars or margin, then translate the approved price into an honest customer-facing offer.

Include what it takes to complete the clearance sale

A price that covers landed cost may still fail to cover the costs of making the sale. List the expected commission, card charge, touch-up work, extra handling, and any delivery expense the store will absorb. Keep those separate from the merchandise gross-margin calculation so the decision is understandable.

For Sofa A at $1,800, suppose the store expects $150 of additional selling and handover costs. The $450 gross profit leaves $300 after those costs, before other overhead. If it needs extensive repair, the available amount changes again. A warehouse manager's condition note can therefore be as useful as the original invoice.

The owner may deliberately approve a loss to release cash or make room for a better program. Write down the reason and the approved floor price. A planned exception is easier to manage than discovering after the event that every associate interpreted the discount differently.

Put a cost on waiting without inventing a benchmark

Compare the expected benefit of waiting with the cost of holding the piece. Use the store's own financing, storage, handling, and space assumptions. An industry carrying-cost percentage is not a substitute for knowing whether the cabinet occupies a warehouse bay, a productive showroom position, or an otherwise unused corner.

For the same review, suppose the owner estimates $30 a month to keep an aging piece. Waiting another six months adds $180 under that planning assumption. If waiting is expected to improve the eventual selling price by only $100, the additional wait has a weak financial case before considering further wear.

Avoid counting the same expense twice. A full allocated rent figure and a separate charge for the identical floor space need reconciliation. The point is a useful choice between selling now, improving the presentation, or giving the piece a defined further selling period.

Use OrderPilot's receipt history before approving the tag

OrderPilot's dated receipts and landed costs provide the record behind the sample's age and acquisition cost. Costing layers preserve the difference between older and newer receipts, so a manager can review the lot that matters rather than assuming today's vendor cost describes yesterday's floor piece.

There is no dedicated aging report in OrderPilot; build the review from receipt dates and the stock records. Keep a short working list with the piece, receipt, condition, current ticket, proposed clearance price, and approval. That makes the receipt history useful in a monthly buying conversation. Roles determine who can see costs, and supplier costs stay off the POS register. The manager can approve the price from the cost record while the associate presents the furniture, condition, and customer price. Give the floor team an approved range or an escalation point so they can finish the conversation confidently.

Set warranty and commission expectations before the offer

Describe the display's condition specifically: a marked leg, worn piping, a missing cushion, or a finish variation. Photograph what the customer is accepting and make the sale wording match. “Floor sample” alone does not explain the condition, and “as is” should not be treated as a universal shortcut to a shorter warranty.

Use the floor-model and as-is guide to work through the warranty and sales terms. Establish the wording before the event, so an associate is not improvising it while the customer waits at the register.

Commission also follows the store's configured rule. A discount lowers net merchandise; where commission uses gross profit, cost affects the basis too. Review the commission settings and any authorized exception before promoting a below-cost sample. Selling at a loss does not, by itself, tell staff what their commission will be.

Give the floor sample a final route out

Use This location in POS when the actual display is being sold. For tracked catalog items, Order New lets the customer buy a fresh one while the display remains. Identify which unit is promised, then arrange the actual pickup or delivery; the cross-showroom floor-model workflow covers the extra handoff when another location holds it.

Keep a lifecycle card for each sample:

• Receipt and floor-placement dates.
• Configuration, landed cost, and current condition.
• Program status and orders the display supports.
• Review date, approved price, and next action.
• Condition and warranty wording for the customer.
• Commission treatment, handover owner, and replacement plan.

Bring unresolved cards into the owner's regular review. Every sample should finish that conversation with a purpose, a price decision, or a date for leaving the floor.

Sources

1. Original planning calculations — Markdown, margin, carrying cost, and aging buckets are worked examples, not industry benchmarks.
2. OrderPilot product walkthrough — Receiving, costing, roles, and POS features.