The biggest problem with stores is liquidating old inventory. It does not matter what it costs when you have products over a year old. You need to keep reducing the price until they are gone. You should never have more than two prices on any product (regular price and sale price). Here are a few methods that can be helpful:

1. You could mark down all of your old clearance 20% monthly or perhaps every 6 months 50% off the sale price. These old items are taking room on your shelf and are costing you money. You must not let the cost hamper you from the markdowns. This can help your cash flow, create positive customer opinion and help your profit in the future.  You should date all of your products. Putting dates on products will help you keep track for future markdowns. The consulting clients that have dated their product are surprised how much old inventory is discovered.

2.  Mark any product more than one year old at least 20% off. All merchandise two years and older should be at least half off. This can be a big help for your old inventory, cash flow, sales and eventually profit in your store. This is merchandise that is taking space and gathering dust. It needs to be priced to sell. Short-term it will lower your gross profit percentage and increase your cash flow. Long-term it will increase your gross profit dollars and percentage.

3. You should never run out of your top 10-20 items. The cash flow from your old items can be used to purchase more of the top sellers.

4.  You should get rid of the bottom 10-20% of your product lines yearly and order new product lines to replace them. Mark down the poor selling product lines to half off to get rid of them.

You make nothing with the old inventory. Let’s say, it costs $10 and you sell it for $5. You can take that money and buy a top seller. Let’s say the top seller costs $5 and retails for $10 and you sell one a month. What is your net profit from the poor selling item?

Your cost would have been $10+ $5 x 12=$70

Your Retail would be $5+ 12 x $10=$125

Your Net Profit would be $55

Too many owners get concerned with the $5 loss instead of the gross profit of $55.