Examples provide a system for managing disposition of returned items and/or items having damaged packaging. An item is identified based on item scan data. Item data associated with the item and condition data describing the condition of the item, including describing defects in the item or item packaging. The system identifies a set of applicable disposition options customized for the item. The system recommends a disposition from the set of applicable disposition options to assist the user with selection of an appropriate disposition. The disposition can include a price markdown, donation of the item, return of the item to a supplier, and so forth. If the selected option is a markdown of the item, the item disposition component generates a markdown amount for the selected item which avoids loss for the item. The item disposition system generates a label for the item including details of the selected disposition.