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The True Retail Markup: The Same Products Across Your Favorite Stores

July 1, 2020 04:17

The True Retail Markup: The Same Products Across Your Favorite Stores

Having worked in manufacturing for years, we’ve long observed the phenomenon that is retail mark-up. 

Usually, the markup you see in budget and mid-market retailers is commensurate with the number of middlemen involved before a product gets to the retailer, plus logistics fees, rent and labor that the retailer pays and a modest profit margin. Once a product starts to get into premium or luxury retail, then the price includes all the above, but you also start paying for the brand which is basically the costs the company incurs for inputs such as design, marketing, merchandising, location and also just a tidy profit based on scarcity and perceived value because of the brand's reputation.

We don’t necessarily take the view that the consumer is being unfairly charged. Far from it. But…

We’ve often seen cases where a generic manufactured version of a product is made for $2 and a budget or mid-tier retailer will sell the product for between $4 to $6. A  premium or luxury brand might add additional labeling, packaging, or material that enhances the look and uniqueness of the product —but not the product itself – and charge $25, when their "changes" only add an additional dollar to the manufacturing costs (sometimes they literally just add a $.01 tag). In high luxury, these same products sometimes go for hundreds of dollars.

The consumer obviously derives value from appreciating the aesthetics of the designer, having the experience of going into a luxury retail store and being associated with a luxury brand. We get that. But the price the customer is paying for the product is far above what the product actually costs to manufacture. 

To show you what we mean: we did a survey of 17 products that we have available at Supplied, and compared them with the retail price of similar products at Target (representing the mid-market category), Nordstrom (premium category) and FarFetch (luxury category). 

We found the product that was nearest in visual qualities, material, and size to the same wholesale product available at Supplied. You can see the results: on average, Target marked up the products by 993%, Nordstrom 3,212%, and Far Fetch on average marked up products a whopping 13,350%. 

As a boutique retailer, you should be smelling the potential value from a partner like Supplied. What if you could double your margins by leaving your prices the same but getting the product for half the cost at Supplied? And what if you could begin to approach the margins already accepted as normal by consumers at notable retailers? 

We believe the above chart should give you confidence that the products at Supplied are generally just as high quality as some of the most luxury brands available at FarFetch —  and you're justified in charging what might feel like an excessive markup on them. Of course product quality does matter — but a lot of your pricing decisions need to be based on your target demographic, where your store is located, your overall aesthetic, and how you merchandise / display your products to your customer. If FarFetch can markup items 11,000%, you should feel good about 300%!

Even if you're only going after the Target or mid-market price range, you should rest assured knowing that, that at Supplied you can expect a minimum of a 980% markup while still giving your customers a great deal — and that's better than the 100% markup that you might be used to with traditional wholesalers. We are giving even the smallest businesses access to the same supply chain that the largest retailers in the world have access to. 

It’s always better to go factory direct with Supplied. 

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