If you listen to the game trade experts, you will know that discounting is a bad thing. It dooms you to your parent's basement and a life of ramen noodles. But what do they mean? I've talked to people that have taken this mantra so much to heart that they're afraid to discount anything. "But Dave said no!"
What the game store gurus are referring to is running a discount store, where everything is discounted across the board. That's a recipe for ramen, er, I mean failure. You can absolutely do it. If you want to be a game store monastic and take one for the team, by all means, it's possible. Your store won't have nice things. You certainly won't have nice things, or a future, but you can. I've got a competitor right now that does that and I'm basically waiting for them (or their mom) to lose interest.
What you should do, what you absolutely must do, is discount things to get rid of them. This assumes you run a profitable business with inventory management, payroll, and profit. Dead inventory ties up your cash flow and impedes you from paying your bills and getting all the new things, which is your recipe for success. Inventory is your economic engine and when it's full of sludge, the performance of your store will absolutely suffer. You owe nothing to anyone in this regard. Your job is to tune for high performance.
Sure, you can run a "shock and awe" store, and many do successfully. They never get rid of anything. They've got gems from a decade ago. But could a single one of them tell you how to run a shock and awe store? Could they put down on paper exactly what's required to run a one turn a year inventory hoarding business? Can they tell you why their retirement funds are tied up in sludge inventory?
The best I've gotten is "This is what we do, it works for us somehow, but I don't recommend it." There's probably a way to slog through the first decade of a shock and awe store, without making a dime, and coming out strong and safe on the other end, but why would you do that on purpose? Shock and awe is usually something that happens to you, rather than a business plan.
How you discount, where you sell your goods, and how soon is up to you. Generally, I do it like ripping off a band aid. If I get in a product I accidentally ordered and I know it has no hope of selling at full price, I discount it out of the box, and I discount it 40% to quickly get that money back (gross margins are around 45%). I don't wait because I know. That's true of anything I dump. I want it gone. I'm not going to be clever with a graduated sale, with 20% today, 30% tomorrow and 40% on Saturday. I want the money back ASAP because I don't have time with something that already has the stink of death surrounding it and I'm not putting it on sale because I want to entice customers (also dumb).
If I were concerned about image, I might put all my dead stock on Ebay or Amazon and sell it slowly. In a perfect world, I would have an upmarket store and a down market store and I would ship all my junk to the down market location (that's just fantasy though). Generally though, I have a subset of customers, my vultures, that come and pick the bones clean. They shop the clearance bin, and that's ok. Dead inventory is a thing that happens. Vultures are necessary for the ecosystem. Everything will be dead one day, it's just a question of whether the last one goes home at full price or a discount.
The game trade is front list driven. As the last two fairly crappy months of releases have shown, if you don't have the new things in the game trade, your business will suffer. Recovering inventory dollars is how you maintain that cash flow and inventory clearance is how you do it. It's just a tool in the tool box.