What is the purpose of a markdown in inventory management?

The purpose of a markdown in inventory management is to encourage sales of slow-moving inventory. When products are not selling as anticipated, a markdown reduces the selling price, making the items more attractive to potential buyers. This strategy aims to clear out older inventory, make room for new products, and ultimately drive cash flow. By incentivizing customers with lower prices, retailers can stimulate demand and lead to quicker turnover of stock.

In contrast, increasing prices on popular items typically serves different strategies, such as maximizing profit margins, rather than addressing slow-moving stock. Creating new product lines and promoting brand loyalty are important marketing concepts, but they do not directly relate to the function of markdowns in managing current inventory.