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

discount store profit

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

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Thanks Brenda for the tip!

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Comments

  1. Judy says

    Ouch…and I always thought H+M’s jewelry items were a bargain. However…if you compared their markup versus Nordstrom’s for similar items I wonder what you would find. I suppose it is all relative and I am sure that the article explains this in greater detail.

    And ouch again on cosmetics.  Again…I wonder if the markup is the same whether you buy drugstore cosmetics of prestige lines?

  2. says

    Makes you wonder doesn’t it—how much does it really cost to make a Birkin or any other of the high priced “it” bags – and how much is it marked up from there? ;-)

    Great post K!

  3. janey says

    I’ve just been doing some reading about fair labour and consumerism, and it’s interesting how people are forced in way to buy things they need from companies who do not have a social conscious.  I posted a link in the forum for anyone who cares to read a couple articles on the topic

  4. judy says

    Mark-up or profit it is good to be aware that no one is giving ANYTHING away.  This post has made me wonder how high the profit is on the impulse buy placement items at grocery and drug stores.

    And yeah…I think shipping costs are one of the most blatant form of profit for online sites.  I always feel they are at least double of what the merchant actually pays to ship the item.

  5. Cheri says

    I think that it is important to remember that mark-up and profit are two very different things. Mark-up has to cover the cost of doing business. So in the mark-up percentage, one has to account for all the other costs besides the item that have to be covered in order to do business: worker salaries, rent, taxes, displays, et al. Actual profit is usually only 2-10% of what the product costs.

  6. says

    I’d always wondered about how their markups work…thanks for this article.

    I’ve also often wondered – before reading this – how stores even stay in business, considering they order so much excess that never gets bought.  (Clearly I wasn’t a business major.)

  7. Megan says

    When the factories were still in the U.S.. my grandmother was a presser. They would have alternating days. One day they would make shirts for a discount store, the other day they would make very high end shirts that would go into Saks and Neiman’s. These shirts came from the same factories and both cost WELL under a dollar to make. Even paying union wages.

    Now that they are all made in china…sheesh! Can you IMAGINE the profit?

  8. Annie says

    I don’t see the big deal.  They have to spend on marketing, promoting, and designing and should be rewarded with profits.  Otherwise, the business would not be a valuable investment and we would instead have fewer stores to choose from because investors would go elsewhere.  That’s the beauty of living in a market economy.  We drive prices up or down through our demand.

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