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Message: <blockquote data-quote="Doug Sundseth" data-source="post: 3842769" data-attributes="member: 52196">A simplified practical example:Let's say you have $1000 (MSRP) of dead stock.  For the purpose of this example, we will assume that the dead stock will sell through in 2 years.  (In many cases, this is wildly optimistic.)  So, after two years, if you don't reinvest the money, or use it for rent, or whatever, you'll have $1000 in cash.Now, let's say that you decide to discount that stock to move it the heck out of your store and put the money into something that will actually sell.  To do this, you mark it down, on average, by 60% and have a big sale.  So now you have $400 that you can reinvest in stock.  We'll assume that you mostly get stock that will sell through 4 times a year.  (This is a pretty normal assumption in retail, BTW.)  Since you'll make some mistakes, we will only assume that you can average a discount of 40%.  So your $400 will get you stock worth $400/.6 = $666 MSRP.  After 3 months, you'll have sold that and reinvested the $666 in stock worth $1111.  You continue this for the rest of the same two years, at the end of which you'll have $14,289.For comparison, let's see what happens if you have to discount it by 90% to move it:  After 2 years you have $5953.That's why it makes sense to sell your stock for whatever you can get for it once it becomes apparent that it's dead.  Understanding cash flow, sunk costs, and stock turns is critical to successful retail.  It also seems to be pretty uncommon among game stores.ps.  This is hugely simplified to remove as many variables as possible.  Those complications don't really change this analysis.</blockquote>

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