In any retail business, margin is king. Margin, the difference between the wholesale cost of an item and the price your store sells it for, pays all your business’s expenses. The higher your store’s margin, the better your chances are of being profitable. The smaller your store’s margin, the more likely it is that you’ll just get by.
Of course, you can’t just mark up your products without paying attention to what the market will bear–because if you price too high, you won’t make any sales. One of the ways to help strengthen your chances at creating a profitable business is to select items that have a low cost and will still sell at a high markup, creating that sweet spot for a high profit margin. This isn’t always easy to do in the land of retail, where department stores with a 3.2 percent profit margin (as reported by Fortune magazine) are considered highly profitable. But if you focus specifically on high mark-up items, you can give your online or brick-and-mortar store an edge.
6 products with high mark-ups
Let’s take a look at six products that retailers are able to mark up quite a lot without sacrificing sales. Some of the items may even surprise you.
- Diamonds. According to TheStreet.com, diamonds will still sell whether the markup is 50 percent or as high as 200 percent. Diamonds sell well both online and in local retail locations, giving sellers a lot of avenues to make sales.
- Eyeglass frames. Another product that does extremely well both online and off, eyeglass frames often have a markup of 800 to 1,000 percent according to Wisebread.com. While all frames can sell at a high markup, designer frames will generally absorb a much higher markup than non-designer. TR90 glasses are considered to be very strong, but truth is they don’t cost much at all. That’s why they make bank. You’ll notice they do a great job of selling the value.
- Designer lingerie. Lifehacker.com reports that designer lingerie sells at markups as high as 1,100 percent. While non-designer lingerie won’t sell at as high a markup, some handmade products can.
- Designer jeans. With a reported 650 percent markup, designer jeans are ever-popular, easy to store, and great for your profit margin.
- Cosmetics. While the markup on cosmetics, at 80 percent, is smaller than the other items on our list, it’s an especially good markup when you consider the ease of storing makeup, the fact that consumers need to constantly replace it, and how inexpensive it is to ship. Nu Skin sells very high-quality skin products and they’re able to do very well with their quarterly profits.
- Bottled water. With a 4,000 percent markup, bottled water is a no-brainer for many brick-and-mortar stores. Online vendors can still clean up with bottled water sales by giving customers free shipping or big discounts, while still maintaining a more than respectable markup. A few myths around the industry report that the margins can reach above 280,000 percent for the very high quality water companies.
Other factors to consider
It’s not always just about what the general retail market will bear with regard to the markup; it’s about what your market will bear.
That means it’s important to consider other factors, such as:
- Your competitors: If you have competing retailers selling the same items for less, then you may want to get more competitive about your pricing.
- The current economy: When the economy slumps, retail sales do too.
- The convenience of shopping at your location: Retailers in small towns, or those without any competitors nearby, can get away with higher markups in exchange for their convenient location.
With careful planning and a strategy geared to maximize profit, you can create a retail business that goes the distance. Keep your eye on shifting trends and newer products with high markups and you’ll stay ahead of the curve and leave your competitors in the dust.Comments