New York Magazine: How Your Favorite Stores Make Money

New York Magazine recently did an excellent report on the various ways businesses, from drug dealers to dollar stores to Goldman Sachs, make money. While the list is focused on New York based businesses, the magazine profiled three businesses/comapnies that are of interest to all shoppers- H&M, Macy’s, and a discount store

The mark-ups on the items sold at the stores are amazing (SJP Bitten lovers- do you still think she’s doing her line out of the goodness of her heart?), particularly on goods like accessories. You would think the cheapest items in the store would be the least profitable, which apparently isn’t always true.

Mark-up of top selling items at H&M
- Jewelry 50-70%
-Skinny Pants: 25%
- Bohemian Tunics: 25%
- Printed Hoodies: 30%
- Berets: 60%

So, for every $10 necklace while it’s important to note the difference between mark-up (the difference between the price a merchant sells an item, the price they purchased it from the manufacturer) and profit (the actual money they make offer the item), the stores are still making a high profit off certain items.  For every $10 H&M sells, it marks up the item $5 to $7. Even if they sell the necklace for $4, they’re still making money.

Even dollar stores make a significant profit on the items they sell, mostly to do their ability to sell things in bulk at rock bottom prices.

Mark-up of top selling items at discount store

discount070611 560 thumb New York Magazine: How Your Favorite Stores Make Money

So what does this mean?  Clothing is big business. Budget is big business. While you may feel like you got a deal, the stores are still making a lot of money. In some cases, a 50% sale isn’t all that much of a deal. Also, it seem that Wal_mart isn’t the only store to practice questionable labor practices (hiring teens, part time workers, etc) in order to keep costs low.
Source: New York Magazine

Read New York Magazine’s Profit Calculator
Thanks Brenda for the tip!