Markdown Season—When Clearance Hits Your Deductions
- The HRG Team
- 5 days ago
- 3 min read
January is when retailers try to get their house back in order.
They’ve got seasonal inventory to clear, new sets to build, and demand that usually cools off after December. One study found retail spending drops an average 22.4% between December and January.
So retailers do what retailers do: they mark things down to move inventory.
And then, weeks later, many suppliers discover they helped pay for it—sometimes intentionally, sometimes accidentally, and sometimes twice.
A quick fictional example (for illustration only)
Fictional example: Your holiday item sells well through mid-December, but the last wave sits. The retailer runs a deeper clearance in early January to make room for spring. Two weeks later, your remittance shows a “price protection” debit. A month after that, another debit appears that looks like markdown funding—same item, same time window, different label.
Nobody called. Nobody emailed. The money just…left.
That’s markdown season.
What “markdown funding” really means
At its core, a markdown allowance (sometimes called price protection or margin protection) is a payment a vendor makes to a retailer when the retailer reduces the retail selling price of inventory. The idea is to protect the retailer’s margin when prices are reduced to sell through the product.
This isn’t inherently bad. There are valid scenarios where markdown support is part of the commercial agreement.
The problem is when markdown-related deductions show up:
without clear authorization,
outside the agreed window,
at the wrong rate,
on the wrong items,
or stacked on top of other deductions that already covered the same event.
Clearance isn’t free. It’s just not always priced correctly.
Why markdowns become a Q1 supplier problem
Markdowns usually happen fast. Deductions usually happen later.
January is also when everyone’s juggling year-end close, returns, staffing gaps, and a dozen portals that each tell a slightly different story.
That’s the perfect environment for “close enough” math.
And if the team is exhausted, the path of least resistance becomes: accept it, write it off, move on.
That’s how leakage becomes policy.
The 5 most common markdown-season deductions suppliers see
Price protection/margin protection debits“: We lowered the price; you owe the difference.”
Markdown allowances or markdown monies: Often similar in spirit to price protection, but coded or described differently.
Promotional true-ups: “That markdown should have been funded as a promotion,” or “The promo rate changed.”
Returns and unsaleables that follow clearance: Clearance moves units—and it also drives returns, damages, and “unsaleable” claims. Returns overall are massive: the National Retail Federation (NRF) projects $849.9 billion in returns in 2025, and estimates 19.3% of online sales will be returned.
Duplicate or stacked debits: The same inventory event is counted twice because different teams or systems touched it.
A simple framework: “Did we agree, did it happen, did it match?”
When a markdown-related deduction hits, ask three questions:
1) Did we agree to fund this?
Is there an agreement, email approval, program term, or contract language?
2) Did the markdown actually happen the way they’re claiming?
Which stores? Which dates? Which items? What was the retail price before/after?
3) Does the deduction match the agreement and the event?
Correct rate, correct item list, correct time window, no duplicates.
If you can’t answer all three confidently, you’re not validating. You’re guessing.
Build a “Markdown Proof Pack” (before you need it)
This is the practical move that keeps Q1 from spiraling.
Create a standard package with:
Agreement proof: terms, rate, dates, item list, approval trail
Price-file proof: your effective dates vs. retailer effective dates
Event proof: ad or online price captures, retailer communication, promotional calendar references
Invoice tie-out: invoices impacted, quantities shipped, deduction math
Duplicate check: search for the same invoice/item/date range across remittance, portal, and post-audit channels
You’re not trying to “win an argument.”You’re trying to present a clean, auditable story.
Three guardrails that keep markdowns from becoming margin chaos
Guardrail 1: Pre-define who can approve markdown support: One owner. One process. No “side deals” living in inboxes.
Guardrail 2: Set a weekly Q1 reconciliation cadence: A 30-minute weekly review in January and February is cheaper than a month of cleanup in March.
Guardrail 3: Require a “store/date/item” footprint for every markdown claim: If the claim can’t tell you where it happened and when, it’s not a claim. It’s a suggestion.
Where HRG fits
Markdown season is a reality. The question is whether it becomes a surprise.
At Harvest Revenue Group (HRG), the philosophy is simple: deductions should be validated, documented, and managed like any other margin line—not shrugged off as “the cost of doing business.” When teams don’t have the bandwidth, HRG helps suppliers audit markdown-related debits, identify duplicates, assemble retailer-ready documentation, and recover what’s recoverable—while feeding insights back so the same issues don’t repeat next quarter.
Because Q1 is hard enough without paying for clearance twice.
