What Is a Clearance Sale? How They Work and How to Get the Best Deals

Clearance sales permanently remove merchandise at reduced prices, with discounts that deepen in stages from 30% to 60% or more. Learn when each product category clears, which stores allow coupon stacking, and how to time your purchases to hit the deepest discount before your size disappears.

What Is a Clearance Sale?

A clearance sale is a retailer’s way of permanently moving merchandise they can’t or won’t carry at full price. That includes end-of-season inventory, overstock items, discontinued models, and products with minor cosmetic issues. The common thread: the store needs shelf space and working capital more than it needs the original margin.

The critical difference from a regular sale: clearance items don’t come back at full price. A weekend promotion runs and prices reset Monday morning. Clearance means the item is on its way out of the inventory system permanently.

Zara attributes about 13% of its annual revenues to clearance sales, per an MIT thesis. That’s a meaningful share of a multi-billion-dollar business built specifically on moving old inventory before new collections arrive. Clearance isn’t an afterthought for major retailers. It’s a structured part of the annual revenue model.

Why Stores Run Clearance Sales

The reasons fall into a few practical categories. Understanding them helps you predict when the best clearance windows will open.

Inventory buying cycles. Retailers commit to purchasing inventory months before it hits the sales floor. Spring merchandise arrives in January. Fall inventory hits stores in July. Winter coats need to be gone by February, not because they’ve lost value, but because the physical and financial space is already spoken for. Waiting too long costs serious money: US nongrocery retailers lost around $300 billion in potential full-price revenue to markdowns in one recent year, per Coresight Research and Celect. Moving product early at 30-40% off beats sitting on it until a forced 70% markdown.

Cash flow pressure. Product sitting on a shelf is money that isn’t moving. For most retailers, freeing that capital to fund the next buying cycle matters more than recovering full cost on slow sellers. Clearance converts static inventory into working capital, even at reduced margins.

The inventory glut problem. US retailers were sitting on $732 billion in unsold inventory in 2022 (McKinsey). Return rates compound the pressure: the NRF reports roughly $890 billion in US merchandise was returned in 2024, feeding directly back into the clearance pipeline. These structural forces drive retailers to clear more aggressively, which is good news for shoppers who know the timing.

Types of Clearance Sales

Not all clearance works the same. Here’s how to tell them apart.

Seasonal clearance is the most predictable. Winter coats in January, swimwear in August, outdoor furniture in September. Timing follows the inventory calendar, discounts run 40-70%, and stock moves fast. Waiting even a week can mean your size is gone.

Overstock clearance happens when a retailer bought more units than they sold. Common after major holidays when promotional items underperformed expectations. Discounts are usually shallower (20-40%) because the merchandise isn’t time-sensitive in the same way.

Discontinued clearance covers items the retailer or manufacturer is phasing out. Electronics follow this pattern heavily. When a phone model gets replaced, the previous generation drops fast, often 40-60% within a few weeks of a new launch announcement.

Store closing clearance starts at 30% and ramps to 70-80% as the closing date approaches. Selection thins out quickly, so early timing matters here.

What Goes on Clearance When: Category Timing Guide

Clearance timing is category-specific, not just seasonal. Knowing which product types clear when gives you a real shopping edge.

Apparel and shoes follow the seasonal calendar most closely. Post-holiday (late December through January) is prime time for winter clothing. Late June through July clears spring and summer inventory. Good sizes and colors go first, so the best window is early in the cycle before selection deteriorates.

Electronics clear on model replacement cycles. When a new phone, laptop, or TV launches, the previous version often hits clearance within weeks. January and July tend to see electronics clearance peak as manufacturers refresh product lines. Open-box inventory at stores like Best Buy adds another layer of discount on top.

Appliances move to clearance most heavily in the post-holiday period (late January through February) as floor models get refreshed. End-of-year clearance in November also hits appliances before new model year inventory arrives.

Seasonal decor and garden clear aggressively after their respective peak seasons. Christmas decor hits 50-80% off the week after Christmas. Outdoor furniture and garden supplies clear in August and September. Shopping these categories off-season produces some of the deepest discounts you’ll find anywhere.

How Clearance Discount Stages Work

Clearance pricing follows a markdown schedule most shoppers never see. Retailers typically open clearance at 30% off, deepen it to 60% after a week or two, then donate or write off whatever’s left. Larger chains automate this through inventory management software, but the underlying logic is the same across the industry.

Color-coded tags track where an item sits in the markdown cycle. Yellow tags typically signal a first markdown. Red tags usually mean final markdown, last chance before it’s gone. The system varies by retailer, but the pattern is common enough that asking a floor associate what the store’s tag colors mean is always worth two minutes.

One thing worth knowing: the discount is always off the original retail price, not a previous sale price. A coat marked “originally $200, now $80” is 60% off full retail. Not 60% off some intermediate sale price.

When to Shop Clearance for the Best Prices

The instinct most shoppers have, to wait for the deepest possible discount, costs them selection. Retailers open clearance at modest discounts and deepen them as the inventory deadline approaches. The best prices hit mid-to-late cycle. But mid-to-late cycle also means fewer size options and fewer color choices.

Electronics and housewares hold selection longer than apparel. For clothing and shoes, move earlier in the cycle. For home goods and electronics, you have more flexibility to wait.

What most deal guides miss is the online vs. in-store gap. Across the stores we monitor, clearance pricing for the same items frequently differs between a retailer’s website and their physical locations. A winter coat marked 50% off online might still show 20% off in stores, or vice versa. Checking both channels before buying takes about two minutes and has paid off often enough that it’s a consistent part of how we track deals.

Clearance and Coupon Stacking: Which Stores Allow It

Here’s where clearance shopping gets more interesting, and where most articles stop short.

Some retailers explicitly exclude clearance items from coupon codes. Others allow stacking, and the savings can really add up. Here’s what we’ve tracked across major stores:

Kohl’s allows clearance items to stack with Kohl’s Cash and store card discounts. A clearance item paired with Kohl’s Cash can push effective savings well past the clearance price alone, particularly during semi-annual clearance events.

Macy’s regularly runs promo codes that apply to clearance and sale items during major sale periods. From the coupon data we track across the platform, Macy’s clearance plus a promo code is one of the more consistent paths to 50%+ off brand-name apparel. Both the timing and the stacking behavior have held up long enough to plan around.

Target allows Target Circle rewards on clearance purchases. The RedCard adds an extra 5% on top. Clearance markdowns at Target hit hardest on Sunday and Monday, when the weekly markdown cycle refreshes.

Walmart clearance rarely stacks with codes, but the discounts run deeply enough on their own. The Walmart clearance section online is large and updates frequently.

Not sure if your store allows stacking? Check the coupon terms for excluded categories. If you’re shopping in person, asking at checkout beats guessing. Our coupon stacking guide covers the full breakdown by retailer.

Where to Find Clearance Sales Online

Online clearance sections are often buried. Retailers don’t push them heavily because they’re moving low-margin inventory, not building brand excitement. The major stores worth checking:

Walmart’s online clearance section is deep and refreshes often. Target’s clearance follows a weekly schedule, with biggest drops on Sunday and Monday. Best Buy’s clearance section lists open-box items alongside discontinued models, often at 20-40% off current retail. Nordstrom Rack’s “Clear the Rack” events push clearance items periodically to 85% off.

The big advantage of shopping clearance online is you can filter by category, size, and price range instantly. In-store clearance requires physically searching the rack.

What to Know Before Buying Clearance

A few points that trip people up.

Return policies often change on clearance items. Many retailers restrict final-sale clearance to exchanges only, or no returns at all. Check before buying, especially for anything over $50.

For electronics, a discontinued model on clearance might have limited manufacturer support remaining. For a pair of jeans, irrelevant. For a laptop or appliance, worth checking before committing.

Sizing runs out early. Common sizes and popular colors go first. Waiting for a deeper discount often means waiting for a size that no longer exists.

Frequently Asked Questions

What is the difference between a sale and a clearance sale?

A regular sale is a temporary price reduction tied to a promotion or event. Prices go back up when the sale ends. Clearance is permanent: the item won’t return to full price and is being phased out of active inventory.

When do clearance sales typically happen?

The major clearance cycles follow inventory calendars. Post-holiday clearance runs January through mid-February. Spring clearance peaks in late June and July. Back-to-school inventory clears in late August. Category-specific events (electronics model cycles, post-season decor) run throughout the year.

Do clearance prices go lower over time?

Usually, yes. Retailers markdown clearance in stages, so the opening price is rarely the floor. The risk is that popular items sell out before the deepest discounts hit. Items with fewer buyers, niche sizes, less popular colors, tend to reach the steepest final discounts.

Can you use coupons on clearance items?

Depends entirely on the retailer’s terms. Some stores exclude clearance from coupons. Others (Kohl’s, Macy’s, Target) allow stacking, sometimes with meaningful additional savings. Check the coupon terms before shopping or ask at checkout.

Does a clearance label mean the item is damaged or defective?

No. Most clearance items are perfectly functional. They’re on clearance because the store needs to move inventory, not because there’s anything wrong with the items. Some clearance sections include open-box or display units, which are typically disclosed separately.

Are online and in-store clearance prices the same?

Not always. Clearance pricing frequently differs between a retailer’s website and physical stores. Checking both before buying is worth the two minutes.

Is it better to shop clearance early or late in the cycle?

Early gives you better selection. Late gives you deeper discounts. For apparel, move early before sizes run out. For home goods or electronics, you have more flexibility to wait.

Sources

1. MIT DSpace: Orietta Parra Verdugo thesis: Research on Zara clearance revenue attribution (2010)
2. Total Retail: Coresight Research and Celect study: US nongrocery retailer markdown revenue impact (2018)
3. McKinsey: Retail inventory glut analysis: US retailers unsold inventory data (2022)
4. NRF: 2025 Retail Returns Report (nrf.com/research): US retail return rate and dollar volume (2024)

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