One interesting thing I've learned from my job is about markup. Since we have stores nationwide and I am involved in the advertising for those stores, I am sometimes privy to information about how much our products are marked up. Said information is confidential so any examples I use in this post are purely hypothetical.
Much like Bed Bath & Beyond, my company posts/mails out/advertises a lot of 20% off one item coupons. I never thought about this before, but I take this to mean that every single product we (and BBB) sell is marked up at least 20%. So if you pay full price for something, you're probably dumb. Wait for your coupon. Use your coupon. Or at least wait until it goes on sale. The company will still be making a profit but just not as much profit.
I overheard that one item (hypothetically) we sell for $9.99 is something we actually buy for 70¢. This means the manufacturer is cranking these out at a factory for probably 20¢. I understand you have to factor in production costs, shipping, etc. but that is (theoretically) one hell of a mark up on that product.
Like I said, I never really thought about this stuff before I started working for a company with retail stores but it's changed my shopping mindset. It is incredibly, incredibly rare that I will pay full price for something. I don't shop for a lot of clothes, but I buy a majority of my clothes from Salvation Army. If I got to Target or Kohl's, I will head to the clearance racks first and the sale racks second. If I don't find anything I like then, I probably won't get it.
If I have a gift card, it skews my perception but I still try to follow my rules. I really want to buy the DVD for Thor since I didn't get it for Christmas. It's currently $19.99 at Best But and I have quite a few gift cards there. However, The Avengers film is coming out soon and I'm pretty certain the price for the Thor DVD will go on sale around the time to capitalize on the tie-in so even though I have a gift card, I'm going to wait on it.
I'm sure there are a lot of economic and market factors I don't understand but the thought that kinda blew my mind was that a store sells everything for a profit. Even if it's on sale or you have a 40% off coupon, they're still gonna profit.
4 comments:
That is very interesting! I was thinking about you the other day because I saw one of your company's ads in the Clipper, I think.
As for myself, sometimes I think about markup, sometimes not. Like, for instance, I really cannot stand when I see a shirt at the Gap or something that's like $50 but made somewhere like in China. I just can't buy it because I know that the actual cost of the shirt is very, very low. However, your post got me thinking that for some clothing stores, like Eddie Bauer (one of my favorite clothes stores...wish they made maternity clothes), I haven't really considered how much their markup is and where they make their clothes...I guess because I consider their quality to be very, very decent, so I will buy a full priced shirt of theirs...although I do try to wait for some sort of sale if I can.
And there are some stores that send me so many promo emails with various promo codes for discounts that I won't even bother buying anything from that particular store UNTIL I get an email from them with their latest deal. I think I did this when I purchased some shoes from New Balance last year. I had to wait a week or so, but sure enough the email came and I was able to get a "deal."
Mostly, though, I am not a shopper and really don't like shopping with people...especially women who go shopping just to shop. In those circumstances, I sometimes feel like there is this pressure to buy something (anything!) to consider the day successful. But I really don't like buying just to buy, or shopping just to shop. I find this particularly difficult when I go out shopping with my mother-in-law...I don't like remarking about whether I like something or not because more often than not I feel like because I say "I like this" or whatever that she will then want to buy it for me, when really I have no interest in owning it...I just like it.
For me, I really only buy something if I either need it (perceived or real) OR if I see something and I think that I could use it or that it's unique or something.
WOW -- your post got me thinking!
It pretty much kills me to see kids walk around campus with Jansport backpacks because working from at my old job, I know what it cost to manufacture them, and it's similar to what you were saying in your post. The super basic Jansport bag that retails for $35-40 costs about $1-1.50 to make. And a $100 bag probably costs about $5-7. You don't really think of a backpack being a fashion item, but kids are essentially paying for that Jansport logo. Jansport and the retailers know that, so they hike up prices.
One frustrating thing at my old job was that they would never upgrade anything because the CPO (Chief Purchasing Officer) would always say, "It's going to drive up the unit price $.10; we can't do it". I understand that when you're manufacturing and shipping 250k units, you want to keep costs down, but seriously, we can't spend an extra 10 cents?
And a lot of why things cost what they cost is mainly due to how many times the merchandise changes hands. Everyone pretty much doubles or triples what they sell it for vs. what they bought it for to cover things like you mentioned; overhead, holding costs, shipping costs, manufacturing costs, etc.
Jenny, to talk about what you brought up, I am 100% sure that Eddie Bauer has a mix of products that they manufacture and items that they have people make for them. The latter is called a private label. They either buy a product from a company and tell them to put their logo on it, or they partner with that company and develop a new brand that's only sold in their stores. Or, if they're a larger retailer, they do both of those examples as well as sell the 3rd-party company's regular brand. They usually do it to target different price-points; like a entry-level, a mid-level and an upper-level and the quality of each brand reflects that.
I did a quick Google search and Eddie Bauer has a backpack brand called "First Ascent", which looks like it's a more technical hiking brand (they also have jackets and vests), and it's an exclusive partnership with a company called Point 6. At my old work, we private labeled about 3-4 brands and the only way you knew it was a private label was if you knew what you were looking for. We never changed the tooling on the hardware, so the zipper-pulls had our logo on it. It would also have a tag inside, usually with our info on it. It's a great way for companies to make money; I think we made like $4-5M on a private label that basically involved just sewing on a different logo onto our regular product.
Curious to know what you buy at "Best But." :)
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