Pricing
The bakery markdown has to answer for tomorrow
By Prof. Alessandro Buffoli, PhD
Clearing today’s leftovers is useful. Training regular customers to postpone full-price purchases can change the result.
At the end of the day, a bakery has bread left to sell. A markdown appears to solve a clear problem: recover some money from stock that may otherwise have little value.
I would still look at tomorrow before judging the offer. If regular customers learn that the bread they want reliably becomes cheaper at a particular time, some may delay buying. The markdown can change the demand pattern the bakery uses to decide how much to produce.
That is a possibility to measure, not a claim that all evening discounts fail. The relevant comparison depends on what would happen to the bread and the customer without the offer.
Separate leftover recovery from promotion
Suppose a hypothetical loaf normally sells for HK$40 and is marked down to HK$24. If it would otherwise remain unsold and have no recovery value, the markdown brings in HK$24 before any additional selling costs. Its production cost has already been incurred for that day’s decision.
If a customer who would have paid HK$40 waits for the same loaf, the comparison changes. The business has given up HK$16 of revenue on an existing sale. Over time, production costs matter again because the bakery can adjust what it makes. Mixing the immediate clearance decision with the longer-term production decision makes the result difficult to interpret.
The discount should never relax the business’s food-safety requirements or misrepresent the product’s condition. The commercial question concerns food the business can appropriately sell under the stated terms.
Record the day, not just the discounted hour
I would follow full-price sales, marked-down sales, leftovers and production quantities together. Compare reasonably similar days and account for weather, special events and changes in opening hours where relevant. A successful clearance hour can coexist with a weaker full-price afternoon.
Ask whether the markdown attracts an additional customer or shifts an existing one. Where customer-level information is available and used appropriately, repeat patterns can help. Otherwise, a carefully designed trial across comparable periods can still be more informative than a single before-and-after total.
There is also a forecasting question. If the same products are left every evening, marketing should bring that pattern back to production. A discount can clear an error repeatedly without making the underlying decision better.
My preferred result would be fewer leftovers, a sensible recovery on the stock that remains and no damaging loss of full-price demand. The right markdown may contribute to that result. So may baking less of a particular loaf. A good report should allow the bakery to discover which decision it actually needs to change.
Prof. Alessandro Buffoli, PhD
Assistant Professor of Marketing at The Hang Seng University of Hong Kong.