Retailers markup the price on everything we buy…in some cases as much as 4,000 percent. That means consumers routinely pay much more for an item than it costs to make.
In this Just Explain It, we’ll take a look at what items are marked up the most. First, here’s how markups work.
A markup is the percentage difference between the actual cost and the selling price of an item. For example, a pair of shoes that cost $90 wholesale…sell for $495 after a 450 percent markup. Shoes and clothes are usually marked up between 100 and 500 percent. Most of the time it’s all about the retailer’s bottom line. They need to cover operating expenses and make a profit.
Related: 20 Products With Giant Markups
So what items are marked up the most? Here are a few, starting with movie theater popcorn.
The markup on a $6 medium-sized bag of the snack can be as high as 1,300 percent. Here’s why. Theaters don’t make a lot of money from new movies. Most of the ticket sales for first run films go to the movie studios. In order to cash in, theaters up the price at concession stands. That’s where they make 40 percent of their profits.
The markup on brand-name drugs could be as much as 3,000 percent. According to Medtipster.com, the active ingredients in Paxil cost almost $8. Retail price for 100 tablets, however, is about $220.
Markups on brand-name drugs reflect the billions of dollars spent on their development, manufacturing and marketing. In order to cover costs and turn a profit, drug companies charge a premium price for their products.
And even with a 4,000 percent markup, bottled water sales are increasing yearly. In 2011, Americans spent almost $22 billion on bottled water, according to the Beverage Marketing Corp. That’s over nine billion gallons total -- or almost thirty gallons per person. Here’s the kicker: about half of all bottled water comes from tap water.
Do you think markups are out of control? Or, do you have a topic you’d like explained? Give us your feedback in the comments below or on Twitter using #JustExplainIt.