We have a very large ecommerce site and brands are constantly discontinuing items and coming out with new ones. Right now when an item is permanently discontinued we remove the product from our system and return a 404 if someone goes to that product page.
When I log into WMT I've always gotten alot of 404 notifications.
I still see 404 notifications for products that haven't been on our site for years.
My question is: Can a site have too many 404's and get a penalty.
If so, then what is the best way to handle products that are discontinued?
Should we:
1) Leave them in the system and return a 200?
2) 301 redirect somewhere else?
3) Continue serving 404's? (not soft ones)
$) Is there a better option?