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Do retailers gouge with huge markups?





baboosaa
Many store owners do mark up the prices anywhere between 25 and 50 percent, but this is mainly to cover additional operating expenses such as taxes, repairs and utilities, to name a few. So although stores may buy products at a retail rate, the profit they earn is very small, perhaps as low as 3 percent. It is the store owner who ends up paying for any loss, and there are typically no payday installment loans available to the self-employed during cash flow crunches.
Some shoplifters may justify or reason with themselves by thinking the items they steal are petty items with little value. Here’s an example: Suppose that all a person stole was a single pack of gum. But what if several individuals stole a pack of gum each? Because of the lack of profit, the business would need to sell several additional packs to balance it out. This is detrimental to small businesses that are barely making it in today’s market and economy.
It is not only the merchant who will pay, but consumers will have to pay more to make up for what people steal. Think of how sad it is for those who only have a set amount of money to live on, such as those who are disabled or retired. Think of all the hard working individuals who are still living on short term loans for people with bad credit to make ends meet. There is also the risk that some stores may have to go out of business because they have lost so much money and can no longer operate due to shoplifting thieves. When this happens, people may have to travel farther to get needed medicines because the one they used to go to went out of business.
Shoplifting is a crime, and the thief will pay if caught one way or another. Sometimes you may be caught by managers working within the store and only be given a warning, if lucky. However, most would want to teach the shoplifter a stern lesson and have harsher punishment rendered perhaps by calling the police and having them arrested, even if it was the first time. We live in a time where many small businesses are barely breaking even, so they will most likely not put up with it. They want to teach shoplifters that there are consequences to their actions, and those results can be severe.
LittleBlackKitten
A company part factory prices for an object, then places a markup on the item.

In this case, let's take one of the extremes; Nike Shoes.

A shop buys Nike Shoes for $5 a pair. (Yes, that is accurate).
The shop then marks the shoes up to $100-$200 dollars a pair on average.
Nike notifies them that the shoes are not in factory production any more and to buy new stock.
The store marks the shoes down to $75/pair. They still have made $70 dollars on that pair of shoes.


Or, couches.

Couches cost about $100 to make, and they are bought at factory between $150-$200 depending on the make. Depending on sale price, the shop makes about a grand, even on sales.

Something less ticketed. Lets take fruit cake for example.
A flat of fruit cake costs a factory anywhere between ten cents and a dollar in bulk to make the cake.
Safeway sell it at christmas time for around $3-$5.
On Clearance, each one is about $1.
So even on a cheap item, they're making a killing.

But some stores do this:

October First, the item is at $1.25.
October Tenth, the item is at $1.35.
October Thirtieth, the item is at $1.45.
This baloons up to December First at $2.25, and they then offer a 25 cents off sticker, and people think they're getting a deal. Sales skyrocket.

Walmart and Superstore are FAMOUS for this. I used to WORK at Superstore at Christmas and had to replace the stickers every monday in my section and watch it happen. It got to the point where I was telling people to go shop at Safeway. Laughing

Initially, they're more expensive, but if you look at the bill approaching christmas, Safeway will still cost the same or less than Superstore does at christmas, and shopping at Safeway all year evens itself out (and think of all the air miles!)
standready
baboosaa wrote:
Many store owners do mark up the prices anywhere between 25 and 50 percent,

Where did you get this information? As LittleBlackKitten pointed out, retailers marked items up a lot more than that. A twenty-five percent markup on a product is considered a "loss-leader" item meaning the store uses that item to draw you into the store and does not even operating expenses.

As a product developer/manufacturer, the figures we use in determining the "Manufacturer's suggested Retail Price" (MSRP) is that everyone that touches the product is going to at least double the price (100% markup) > Wholesaler > Distributor > Retailer. Then working backwards from the MSRP that a target consumer is willing to pay for a product to see how viable that product is for us to produce. Sometimes the "middle" men are less, other times more.
Afaceinthematrix
standready wrote:
baboosaa wrote:
Many store owners do mark up the prices anywhere between 25 and 50 percent,

Where did you get this information? As LittleBlackKitten pointed out, retailers marked items up a lot more than that. A twenty-five percent markup on a product is considered a "loss-leader" item meaning the store uses that item to draw you into the store and does not even operating expenses.

As a product developer/manufacturer, the figures we use in determining the "Manufacturer's suggested Retail Price" (MSRP) is that everyone that touches the product is going to at least double the price (100% markup) > Wholesaler > Distributor > Retailer. Then working backwards from the MSRP that a target consumer is willing to pay for a product to see how viable that product is for us to produce. Sometimes the "middle" men are less, other times more.


It really actually depends solely on the specific item being sold. I have many years of retail experience and I have had access to many cost prices. Certain items, like electronics, have an extremely small mark-up. It's very difficult to make money on an electronics store. Food also has a small markup because there is so much overhead in a restaurant.

Tools do not have very much markup. Most of my retail career was as a tool salesman. Hand tools have a larger markup than things like compressors but power tools (drills and such) do have a large markup. Paint has a large makeup (and the expensive paint that's twice as much maybe costs an extra 10 cents a gallon to make...).

However, the largest markup are clothes and shoes. The markup is so insane that if I ever opened my own retail store, I would open up a clothing store. However, the competition is harsh with clothing and to get business, you really either have to have thrifty clothes or fashionable clothes - it seems like there is nothing in between.
deanhills
The part that has always intrigued me is that store owners in coastal resorts generally always put up their prices during the holiday season. Must be something to do with supply and demand, and if there is a great demand, then the prices can go up, and if there is a lower demand the prices will go down?
standready
deanhills wrote:
The part that has always intrigued me is that store owners in coastal resorts generally always put up their prices during the holiday season. Must be something to do with supply and demand, and if there is a great demand, then the prices can go up, and if there is a lower demand the prices will go down?

Make the money off of those pest tourists! If they got money to spend on a holiday trip, they won't care about prices. laugh!
Hogwarts
LittleBlackKitten wrote:
A company part factory prices for an object, then places a markup on the item.

In this case, let's take one of the extremes; Nike Shoes.

A shop buys Nike Shoes for $5 a pair. (Yes, that is accurate).
The shop then marks the shoes up to $100-$200 dollars a pair on average.
Nike notifies them that the shoes are not in factory production any more and to buy new stock.
The store marks the shoes down to $75/pair. They still have made $70 dollars on that pair of shoes

Yes, yes. You're brilliant.

.. and terribly naive. You have little to no idea what you're talking about.

Let's walk through a list of some of the things you've lapsed to mention.
  • Taxes
  • Rent
  • Labor costs
  • Electricity costs
  • Replacing stolen goods
  • Replacing damaged goods
  • Covering the costs of providing forms of warranty
  • Capital costs; buying all of the things the store needs to function (i.e. mirrors, shoe-size measures)
  • Advertising
  • Ensuring your store is stocked with all of the latest items
  • Shipping costs

When you actually take a moment to think about it, that amounts to a lot of money. Don't just assume that the only cost the company needs to pay is buying the shoes.
ChrisCh
Don't forget credit card merchant fees and any associated chargeback costs from fraudulent transactions! Wink
deanhills
Hogwarts wrote:
LittleBlackKitten wrote:
A company part factory prices for an object, then places a markup on the item.

In this case, let's take one of the extremes; Nike Shoes.

A shop buys Nike Shoes for $5 a pair. (Yes, that is accurate).
The shop then marks the shoes up to $100-$200 dollars a pair on average.
Nike notifies them that the shoes are not in factory production any more and to buy new stock.
The store marks the shoes down to $75/pair. They still have made $70 dollars on that pair of shoes

Yes, yes. You're brilliant.

.. and terribly naive. You have little to no idea what you're talking about.

Let's walk through a list of some of the things you've lapsed to mention.
  • Taxes
  • Rent
  • Labor costs
  • Electricity costs
  • Replacing stolen goods
  • Replacing damaged goods
  • Covering the costs of providing forms of warranty
  • Capital costs; buying all of the things the store needs to function (i.e. mirrors, shoe-size measures)
  • Advertising
  • Ensuring your store is stocked with all of the latest items
  • Shipping costs

When you actually take a moment to think about it, that amounts to a lot of money. Don't just assume that the only cost the company needs to pay is buying the shoes.
One probably also needs to consider that Nike is a more up market kind of shoe as well, so the design would be more technical and I would imagine the cost of maintaining higher standard of manufacturing and quality testing would be higher. I don't mind paying a higher price for my New Balance running shoes for example as they are really excellent shoes.

What I do object to however are cheap "brand copy" imports from China that are marked up dishonestly. As that can happen easily as well. Usually I can smell it immediately, literally.
Hogwarts
deanhills wrote:
Usually I can smell it immediately, literally.

I'm certain that you actually mean 'figuratively'.
deanhills
Hogwarts wrote:
deanhills wrote:
Usually I can smell it immediately, literally.

I'm certain that you actually mean 'figuratively'.
Nope, I meant literally. It is a really cheap plastic smell. One smells it when you walk into a shoe shop. There was one of those in West Broadway Street, Vancouver, BC. I was intrigued when I saw New Balance runners amongst all of the junk, and then when I sniffed the New Balance runners it was essentially the same smell. A total different smell from the New Balance runners I usually buy.

Sniffing the stuff you buy is always a good idea ..... Very Happy
standready
deanhills wrote:
Sniffing the stuff you buy is always a good idea ..... Very Happy

Thanks for the end of year laugh, Dean!
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