Top 10 Biggest Price Markups
Mark ups are the small profit margins that retailers gain when an item is sold. It is the fundamental of business; it’s the reasons that the amount we pay is not what the item is actually worth. It’s the small amount of money the business owner tacks on to cover expenses and overhead costs such as rent, electricity, heating, etc. But some markups are quite ridiculous and here are some of the really high ones that should be avoided.
Here are ten products that most of us use on a weekly basis that have absurd markups: some range to over 5000%! If we all band together to stop buying these ridiculously overpriced products, they will have no choice but to lower their prices! Read on to save money and join the anti-markup movement!
The thing that many people forget about makeup is what it’s made out of. Make up is usually around 80-90% dirt! The other ingredients usually consist of oil and wax. People pay ridiculous amounts of money to put dirt on their face! Fragrances are added to make them smell nice; but it’s still clay or dirt. A couple grams of dirt will sell in a fancy department store for $20-30. The actual cost of the product is the cost of walking outside picking up a handful of clay, grinding it up and adding fragrance and putting it in a little fancy case. Then it can be sold at a huge markup.
With the proliferation of designer makeup brands and competitive companies, luxury and name brands of makeup have become popular. The old adage says: you can put lipstick on a pig, but it’s still a pig; and you can put dirt in a fancy jar; but it is still dirt. Consider making your own makeup at home (it sounds hard, but it’s not). “Recipes” for creating homemade makeup are everywhere on the internet and can save you money.
9. Bottled water
Bottled water; what a ripoff! Someone decided to take one of the world’s most plentiful resources and cover it with plastic and charge $3-4 a bottle! Bottled water is commonplace at convenience stores, beverage machines, and in the cooler at basketball games. But why? When did we stop drinking from taps and drinking fountains and switch to polyethylene coated H20? When bottled water splashed onto the market, it was being marketed as a healthy alternative to soft drinks.
But it has evolved into an issue of convenience. Instead of using a reusable bottle, it is now easier to grab a prepackaged disposable bottle of water and drop it off in the nearest garbage receptacle when finished with it. But is it any different from tap water? Some companies market their water as being the “purest” or “cleanest” but in fact, all water must comply with federal regulations of cleanliness regardless of whether it is being drunk out of a plastic bottle or from the tap. Water can usually be attained for free at most places.
Bottled water is a corporate success story; they took a readily available product (one of the most abundant resources on the planet!) and packaged it into a popular product that everyone is willing to pay for. But it hurts the consumer’s wallet; not to mention it’s horrible for the environment.
Fiji Water Scandal
8. Greeting cards
The markup on a greeting card is around 100-200%; which is pretty modest considering some of the more vicious markups on other products. But retailers spend very little money to produce this product, so the unsold products do not hurt the bottom line as much as say, an unsold car. Greeting cards are one of the best items to mark up because they are so cheap, and unsold merchandise does not dramatically affect the bottom line.
Paper is cheap, but paper with some sappy writing on it is expensive. It’s a retailer’s dream product! A little piece of paper with some writing on it that can be sold for three or four bucks. Recently, electronic greeting cards (also called e-cards) have proliferated and can be found on the internet for free. On Amazon.com, 20 packs of blank greeting cards are available at a cost of $10.99 for a cost of 55 cents per card. Next time you want to save some of that paper in your wallet when it comes to getting a greeting card, choose to use your own greeting card! It will be more meaningful and will cost less.
7. Mattresses and furniture
Ever notice how mattresses and furniture are always on sale? Well there’s a reason for that. Furniture salesmen receive a higher commission if they sell their product at MSRP (manufacturer suggested retail price); usually a minimum of 20%. If they sell their product at MAP (minimum advertised price) they receive a minuscule 7% commission. If you were a salesman, which price would you sell it at? Do your research and find out what the product is actually worth, then buy it. Markups range from 200%-400%. Buying an expensive mattress might make you sleep better right away, but it could leave you tossing and turning at night in the long run.
The best thing to do to avoid being duped at a furniture store is to shop around a lot before you make your final decision. There is often a wide disparity in the price for the same product between two competing stores; it all depends on the MSRP, the MAP, and the honesty of the salespeople.
6. Restaurant drinks (wine and soda)
Wine has an astonishing 300-600% markup. If you can forego that glass of wine with dinner, your wallet will thank you. What’s even more shocking is that the average markup is even higher for soda. A 12 ounce glass of soda costs the restaurant nickels, but it is sold for dollars; and it is half filled with ice! It’s no secret that you can buy a soda from a soda machine for between fifty and seventy five cents and that same soda will cost $2.75 in a restaurant.
Lately there has been talk of adding a hefty tax to soda because it is unhealthy. So it’s only going to get more expensive. If you’re tired of whining about wine and sniveling about soda, maybe it’s time to choose water instead! (But not bottled water!)
Overpriced Drinks & Other Things We Hate
5. Brand name clothing
Brand name clothiers rely on the advertising power of humans as walking billboards as well as conventional marketing strategies for the advancement of their products. The cost of looking good rises every year as more and higher end clothing brands are created. The cost of the clothes doesn’t change; only the label on the back does, and that’s what changes the price on the tag. The markup can be 500-1000%, depending on if it’s an up and coming brand name clothier or an established Italian sounding name brand.
The trendy and fashionable know what the price of looking “hip” is, and it is seldom cheap. Apparently the label is worth paying the extra money, because high end clothing retailers continue to thrive, even in hard economic times. The popular names and symbols that are associated with major clothing companies are hard to escape from, as they are literally everywhere. People will pay big bucks for “the look,” even if it costs them an arm and a leg to clothe their arms and legs and feet (shoes).
The glittery rocks that cost a fortune are subject to volatile changes in price and high markups. Although the industry average markup varies widely, (100% to up to 1000%) it’s probably not a good deal regardless of where the jewelry is purchased. Jewelers thrive on the uneducated buyer, so it is wise to do research before buying to settle on a good price and product. Ridiculously cheap or expensive jewelry should raise a red flag because it is probably of substandard quality. It’s always a good decision to find out what the same jewelry’s price is at other stores. That information can be used as a negotiating tool.
Also, a diamond over $1000 should come with a certificate certifying its legitimacy from the Gemological Institute of America. Don’t let these rocks rock your monthly budget or you may find yourself in the hole.
3. Glasses frames
Why A little scrap of metal costs hundreds of dollars is one of life’s great mysteries. Yet eyeglass wearers continue to get smoked at the optometrist when they squander huge sums of money for frames that hardly weigh an ounce. The markup can be as high as 1000%! Consider perusing the internet for alternatives before spending hundreds of dollars on frames.
Never buy accessories at optometrist’s offices because they are heavily marked up. Clip-ons, glasses cases, and other eyeglass accessories can usually be purchased for a very reasonable price on the internet. Don’t pay for products at the eye care office before looking over the internet; or you could end up looking at it in hindsight and regretting it; and hindsight is 20/20.
2. Movie theater popcorn/candy
It’s no secret that popcorn and candy are expensive at the movie theater. It doesn’t take an Alan Greenspan to deduce that movie theater popcorn has a high profit to cost margin. Concession sales only make up about 20% of total sales in movie theaters but make up to 40% of the average profit. Why? Because movie theaters need to sell overpriced food to keep ticket prices low. If ticket prices were high, no one would come in the doors and subsequently spend money on snacks. So the price of admission is cheap, but the snacks are where movie companies make the highest profit margin.
So what is the average markup of movie theater popcorn? 900-1200% according to Richard B. Mckenzie, author of “Why popcorn costs so much at the movies” and an economics professor at UC Irvine. Better stick to sneaking your snacks in.
1. Prescription Medicine
Prescription medicine tops the list of highest markups. The sky high cost of prescription medications is crippling the economy of the United States and keeping necessary medicines out of the hands of those who need it most; people living on fixed incomes with acute or chronic health issues.”A bottle of tamoxifen, used to fight breast cancer, costs $360 in the United States.
It costs $60 in Germany,” according to U.S. House Representative Jo Ann Emerson of Missouri. Canada and European countries’ prescription medication prices are regulated by government imposed “ceiling” prices; essentially a limit on how high the prices can get for medicines. They also negotiate directly with drug companies. However, no such price controls exist in the United States and we are paying 200%-5600% markups on essential medicines such as Prozac and Xanax! These two medicines are taken long periods of time; for depression and anxiety disorders respectively, which means that the patients that use these prescriptions will be shelling out thousands of dollars over the course of a lifetime to obtain them.
Award winning Detroit reporter Steve Wilson exposed dozens of Detroit area pharmacies for illegitimate price gouging on the prices of their generic drugs. They were buying them at rock bottom price and selling them at an average of 900-1200% markup, depending on the medicine. The local pharmacies were found selling Vasotec, a blood pressure medication for $60 when it cost them $6 to buy the generic version. Similar markups were found at most of the pharmacies in the area; except one. The solution: Costco wholesalers consistently had the best prices with mark-ups between 86 and 423%, not 3,000 to 5,000% according to Florida WFTV reporter Barbara West, who conducted an investigation similar to Steve Wilson’s. Be wary of the cost of prescription medications when buying from local pharmacies, as they may be interested in your wealth instead of your health.
By Jacob McHugh