How to analyze markdowns by store and what they cost per transaction
The short answer
Markdown cost per transaction is the discount given divided by the number of transactions. Calculate it for each store, then compare each store's average discount depth and share of sales on markdown with its margin per transaction. Stores that discount deepest for the same sales volume are giving away margin the sale did not need.
Store discounting analysis, two stores compared
Why it matters
Discounting is the fastest way to lose margin without noticing, because each markdown looks small at the register. Comparing stores shows where markdowns run deeper than they need to, what each discounted transaction costs, and which store teams can teach the rest to hold price.
The question to ask
Copy this into Lexi as written.
How to work it out
1. Calculate discount depth by store. Divide the discount value by the original price of each line, then average it by store.
2. Measure markdown penetration. Work out the share of each store's transactions and units sold with a discount applied.
3. Calculate margin per transaction. Take product cost off the price paid, divide by transactions, compare stores with similar mix and volume, and check which customer groups receive the deepest discounts.
What the answer looks like
Illustrative output on sample data
Illustrative example: how Lexi answers this for a home improvement retailer. It compares two stores of similar size and mix over a quarter, using discount value per transaction.
- Store A: 14,000 transactions, $182,000 in discounts. Markdown cost per transaction = $13.00. 41% of transactions discounted.
- Store B: 13,500 transactions, $94,500 in discounts. Markdown cost per transaction = $7.00. 24% discounted.
What the data shows
Store A gives away $6 more per transaction, about $84,000 across the quarter, for roughly the same sales volume. Most of it sits in paint and power tools as price matches at the register.
What it means
Contractors with trade accounts take most of those price matches. Ad hoc matching costs more than a set trade price would.
What to do
Test a fixed trade price tier in Store A and track margin per transaction against Store B.
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Frequently asked questions
What is markdown optimization?
It is setting the timing and depth of price reductions to clear stock at the highest margin. Analyzing markdowns by store is the first step, because it shows where discounting is deeper or more frequent than the sales it produces.
Why do stores discount differently?
Local stock levels, staff discretion, competitor prices and trade area all play a part. Some of that is sensible and some is habit. Comparing stores with similar mix and volume shows which differences deserve attention.
Which discount data do I need?
Original price, price paid, product cost and a store identifier on every transaction line, plus a flag for the type of discount where you have one. Without the discount type you can still compare depth, but you cannot see the reason.