Markup cancellation is a subsequently-imposed reduction of the price of goods that had been marked up in the past. A markup cancellation may be imposed for a number of reasons, such as:
The seller has too many units in inventory, and wants to reduce the price in order to clear out excess stock before it becomes obsolete.
Competitors have reduced their prices, so the seller must reduce its price to remain competitive with them.
The original markup was only for a scheduled time period, and the price is automatically returned to its original level once the markup period expires.
For example, a product is normally priced at $50, but the seller increases the price by an additional $10, due to excess demand for the product. This represents a markup of $10. If more units were to be made available for sale by competitors, the seller might be forced to reduce or eliminate its markup. This latter action is called a markup cancellation.
At most, a markup cancellation only returns the price of a product to its original price; it does not lower the price to a point below the original price. It is also entirely possible that a markup cancellation will be for only part of the original markup, so that the new net price is still higher than the original price. Thus, an initial markup of $10 could be partially cancelled, leaving a residual markup of $2.