While most companies claim product markup is a strategy that helps them make money for the cost of producing an item, it’s still distressing that some of these products are sold at ridiculously high prices – more than what they really cost.
This brings us to the question: what are items with way higher than average product markup?
Let’s take a look at all the required, vital information relating to consumer products and their average product markup. Then, we’ll discuss specific items with higher than average product markups and how comparing these costs can help us save money.
Information is power, after all.
- What’s the average product markup?
- Markups on food products
- Jewelry markups
- Clothing and accessories with high markups
- Technology markups
- Markups on miscellaneous items
- FAQ
What’s the average product markup? How to avoid paying top dollar
Typically, when a company sells a product for an amount much higher than its cost, they make a gross profit (no pun intended). The ratio of this gross profit to the sales price of the product is the average product markup.
It might help to look at it like this:
- you buy an item priced at $10,
- you sell the same item for $20, and
- you make a gross profit of $10.
To get your markup percentage, divide the gross profit by the product’s sale price.
For the example above, the equation to find the percentage is:
100 * (20 – 10) / 10 = 100% markup
Now, the truth is most companies sell products for a great deal more than they really cost. These companies do have to make money, of course, but it’s certainly not always necessary to sell products for quite so much of a profit.
So how can shoppers avoid paying top dollar for these overpriced products?
Average product markup amount
Generally, the product markup for wholesale is slightly different from retail. Most wholesale companies go for a 20% to 40% markup margin, while retail brands aim for 55% to 65%.
And this is why products at retail stores are more expensive than they are when purchased from wholesale companies.
Take, for instance, a bottle of wine. At a restaurant, the product markup amount can be as high as 400% – almost 3x to 4x the actual cost of the bottle at a retail location.
This means the product markup amount in stores and restaurants is significantly higher than their counterpart – wholesale companies.
Taking the average price across several categories, we found the following product markups:
Just note that this can vary based on where you’re buying the items, what company made them, and many more factors. The above chart is just an illustration of what to expect.
Why do we pay markups?
There are a couple of reasons why we pay for markups:
- shipping charges,
- import fees,
- VATs,
- custom fees,
- and more.
However, we also pay for these markups so companies can recover costs and make good returns.
Considering that products such as perishable foods and heat-sensitive items require extra care and packaging to prevent deterioration, markups from shipping fees are a necessary evil.
Similarly, markups from import fees are also unavoidable due to the fact that every product going into Canada is placed under the Goods and Services Tax.
Make the best of it: use the right credit card
While there aren’t many known or proven methods for offsetting the high prices on most consumer goods, an excellent method is to use a credit card that provides rewards. Using the right credit card can be both economical and rewarding in various ways.
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In fact, with this Amex, the more you spend, the more travel rewards you get.
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- If you choose to apply, filling the form should take between 10 to 15 minutes.
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Food and drinks with higher than average product markup
As mentioned earlier, food and drinks are one category of consumer goods with insanely high product markups.
Regardless of whether you’re buying from a retail store or wholesale company, chances are good that you’re paying much more than what these items really cost.
Let’s take a look at some of these food products and drinks with high average product markup.
Note: Our example prices in each section are based on a variety of sources that are both Canadian and American. While the price itself may not be accurate at your local stores, they’re meant for a demonstration of the product markup.
1. Movie theatre popcorn
- Popcorn markup price: $5
- Popcorn cheapest price: $0.35
- Example markup: 1,328%
While this is a hard pill to swallow, movie theatre popcorn has the most outrageous average markup – the 1,328% is a completely mind-boggling number.
Theatre popcorn obviously costs snackers a lot more than if they’d bought their own at a grocery store and brought it with them. But because most movie theatres prevent moviegoers from bringing outside snacks into the theatre, the theatre makes it easier to sell their own snacks at higher prices.
It’s also worth noting that when you compare the markup price of microwave popcorn to loose kernels, there’s a slight difference that shows microwave popcorn has a bit more of a markup.
2. Fountain pop
- Coke markup price in a restaurant: $4
- Coke cheapest price in a retail store: $2.17
- Example markup: 84%
The markup price for fountain pop in most restaurants has been estimated to reach heights between 300% and 500% – it can even be more, depending on the convenience and quality of service offered.
Restaurant prices can go as high as $4 for a glass, especially with brands like Coke and Pepsi. In contrast, various grocery stores offer 2 or 3 cans together for about $2.20.
These markups are mostly the result of marketing costs as these soft drink brands fight for market dominance.
3. Alcohol
- Restaurant markup price for wine: $40
- Wholesale cheapest price: $10
- Example markup: 300%
When ordering at bars, especially luxury bars, the markup on alcohol can go as high as 300%. Wine prices are around $40 in many restaurants, often even higher. Wholesale prices, however, are between $10 and $20.
Individual bottles of beer that sell for $0.85 wholesale are typically priced in the $7 to $15 range in higher-end restaurants. These prices can be the result of operational costs, alcohol taxes, and various laws.
4. Coffee
- Coffee markup price: $2
- Coffee cheapest price: $0.50
- Example markup: 300%
Realistically, brewing coffee at home costs a mere $0.50, but even Tim Hortons still charges nearly $2 for a simple, medium-sized cup of joe.
5. Produce
- Grocery store markup price: $3.66
- Farmers price (selling to stores): $0.62
- Example markup: 490%
Grocery store produce can be marked up anywhere from 15% to 70%, depending on many factors. And pre-cut fruits and vegetables can come with an additional 40% markup on top of this. However, buying directly from the farm or farmers’ market can help you save on these markups.
You can help offset these prices while grocery shopping by using a grocery store credit card.
These credit cards help you earn rewards when purchasing grocery items – ultimately resulting in savings on your grocery bill. With certain cards, you can earn as much as 10% cashback on all food-related products.
Jewelry with higher than average product markup
Markup prices on most jewelry products usually vary depending on certain factors – like the quality of materials and packaging, for instance.
6. Diamonds
- Jewelry store markup price: $4,000
- Wholesale cheapest price: $1,000
- Example markup: 300%
From production to display case, the markups on diamonds have quite a range.
Generally, wholesale prices range from $1,000 to $3,000, while jewelry stores charge around $4,000 and up for the same pieces. But people have seen store prices that are a whopping 100% to 400% more than wholesale.
Many people think that diamonds are expensive because they’re rare and extremely popular, but this isn’t necessarily true. High diamond prices in jewelry stores are mostly due to the money invested into marketing strategies and other operational costs.
7. Gold
- Jewelry store markup price: $137
- Wholesale cheapest price: $60
- Example markup: 128%
The markup price on gold is usually about 2 to 3 times the wholesale price. While other metals have an average markup product markup of 20%, gold is often priced 35% higher than its original cost.
Keep in mind, however, that markup prices can vary depending on the type of gold. Pure gold is 24-karat gold, but any number lower than that contains other metals and these other metals are usually cheaper.
Looking for the best credit card to use on those big-ticket items? Read here for more info on what the best credit cards in Canada can do for you.
Clothing and accessories with higher than average product markup
Depending on the brand of clothing and accessories you choose to buy, you may be spending way more than you think for brand recognition alone.
Here’s a look at the average product markup on these wearable items.
8. Glasses
- Branded glasses markup price: $310
- Retail store cheapest price: $84
- Example markup: 269%
The markup on glasses and frames typically can range from 300% to 1,000%. Coach frames can cost between $200 and $310 at an optical clinic, while a generic pair of glasses from an online store can ring up at $30.
In particular, online retailers selling glasses and frames have prices much lower than $450.
Those who do purchase Armani and various other brands of eyewear are paying far more for the design and label name than for the product itself.
9. Wedding dresses
- Store markup price: $7,000
- Wholesale cheapest price: $2,000
- Example markup: 250%
The average cost for wedding dresses is between $2,000 and $7,000. Luckily, accessories are a bit cheaper. These usually ring up somewhere in the $172 to $272 range.
Typically, wedding dresses come with a markup price that’s 8 to 10x the cost of producing one. As this article points out, it’s hard to find wedding gowns that are made cheaply, quickly, and are of high quality. This is a big reason for the high markups.
10. Handbags
- Retail markup price for Michael Kors: $528
- Wholesale cheapest price: $105
- Example markup: 403%
Buying a designer handbag can mean shelling out hundreds or even thousands of dollars. And no matter the brand, retail shoppers often pay an extra 50% more than wholesale for their handbags – resulting in a full markup of around 100%.
Many people spend between $120 to $150 when “splurging” on a handbag that catches their eye. This could be much, much less if it weren’t for the markup.
Technology with higher than average product markup
Product markups on most tech-related items are not as high as other categories on this list. But they’re certainly still overpriced.
Here’s how much extra you’re spending for these tech products.
11. Phones
- Apple markup price: $979
- Wholesale cheapest price: $548
- Example markup: 79%
Smartphones can have a markup range of 25% to 100%. The cost of producing an Apple smartphone (we looked at the iPhone 12) is $548, but you’re likely going to pay $979 at the cash register.
Another detail to look at is how cell phone providers pay as low as ⅙ of a cent for their users to send a text message, yet they charge the customer up to 20 cents. If this same markup was applied to calls, you’d be paying $120 for a simple phone call.
12. Various cables
- Retail markup price: $39.99
- Wholesale cheapest price: $3.39
- Example markup: 1,080%
Cables and cords, especially HDMI and ethernet cables, have an average product markup around 37%. One source claims that ethernet cables are marked up as much as 1,000%.
There’s a range of prices for 6-foot HDMI cables on Bestbuy.ca, including one for $39.99. This Red Flag Deals thread, however, claims that you can find quality cords at Dollarama for as low as $4.
13. Graphing calculators
- Retail markup price: $100
- Wholesale cheapest price: $15
- Example markup: 567%
Product markup price on graphing calculators is nearly 50% in most cases. These are a requirement in many schools across North America and Texas Instruments maintains a monopoly in the market. Their TI-84 is the most popular model and its success has allowed TI to sell their calculators at truly ridiculous prices.
The cost of producing a graphing calculator is between $15 and $20. At retail, however, consumers pay about $100
14. Printer cartridges
- Retail markup price: $20
- Wholesale cheapest price: $5
- Example markup: 300%
Printer cartridges can be marked up at over 300%. They only cost about $4 or $5 to manufacture but you’ll notice a range of prices at Best Buy – anywhere from $20.99 to $9.97.
These crazy prices are partly due to the fact that printers usually sell for a loss, so manufacturers try to make up for the loss by overpricing the ink.
Miscellaneous items with higher than average product markup
While miscellaneous items (such as books and cosmetics) may feel like small purchases, their surprising markups say otherwise.
15. Prescription drugs
- Retail markup price: $700
- Wholesale cheapest price: $100
- Example markup: 600%
The markup on prescription drugs has a shocking range – anywhere from 200% to 3,000%. It’s especially common with recognized brands like Flonase and Allegra.
Epipens are an excellent example of a life-saving medicine that’s unnecessarily overpriced. A few years ago, these epinephrine auto-injectors were selling for $100, but a shortage in 2016 led the price to soar to $600. Since the brand continues to hold the monopoly, Epipens aren’t likely to become cheaper anytime soon.
Furthermore, dispensing fees charged by pharmacies can also impact markup prices on prescription drugs. And drug prices vary between provinces too, thanks to their policies about pharmacy markups.
16. Books
- Bookstore markup price: $20
- Wholesale cheapest price: $12
- Example markup: 67%
Markups on books, especially college and university textbooks, are outrageously high. Author royalties and marketing play a big part in this.
Realistically, a small book store needs a gross profit margin of about 40% to be profitable, so it makes sense that they’d need to charge more for their wares. And since larger stores don’t likely require such a large profit, they’re able to have lower prices on a larger selection of books.
17. Cosmetics
- Retail markup price: $46
- Wholesale cheapest price: $5.34
- Example markup: 761%
While the average markup on makeup and cosmetics is around 78%, it can soar as high as 700% for premium beauty products.
Although the cost of producing these products is often barely more than $5, most retailers sell for more than $40. Especially in cases where a product is celebrity endorsed, many people have no problem paying higher prices for what they consider to be quality, effective cosmetics.
18. Batteries
- Retail markup price: $25.58
- Wholesale cheapest price: $8.99
- Example markup: 185%
The average product markup on batteries is 70%, mostly because retailers are aware we need them and won’t likely pay too much attention to what they cost.
Buying batteries at Costco or another wholesaler will save you a fair amount of cash. These shops aren’t concerned with pricing items of convenience, so you’re able to pay more reasonable prices.
19. Greeting cards
- Retail markup price: $7
- DIY cheapest price: $1
- Example markup: 600%
Greeting cards are little more than folded paper, yet they have an average markup of 200% – often quite a bit more around holidays like Mothers Day and Christmas.
Unfortunately, you’re likely paying 3x more than what the company paid to buy the paper and make these.
20. Mattresses
- Retail markup price: $3,000
- Wholesale cheapest price: $300
- Example markup: 900%
The average product markup on mattresses is between 40% and 50%. In some cases, it can be as high as 900%.
Although it can cost as low as $300 to produce a mattress, retail prices can soar to $3,000. Thanks to regular “blowout sales” and other special event pricing, though, shoppers are usually aware that the price will go down for their desired item eventually. But it’s still frustrating to see this kind of regular price inflation.
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In summary, consumers are spending way too much money on products that can be found for less by following simple cost-cutting practices.
Have you experienced frustration with high markup on your favourite products? Which items are you willing to pay more for? Which ones are worth the bargain hunt?
We’d love to hear about your thoughts and experiences. Tell us your story in the comment section below.
FAQ
What products have the highest markup?
Some products with the highest retail markups are prescription drugs and theatre popcorn – their markups are up to 3,000% and 1,328%, respectively.
What is an average product markup?
An average product markup is the ratio of a product’s gross profit to its sales price. Essentially, it’s the difference between what it costs to produce an item vs. the price we pay at the retail level.
How can I find high-profit products to sell on eBay?
To find high-profit products to sell on eBay, there are a few steps you can follow. Check for frequently searched-for items, then check sites like Amazon or Alibaba to see how much they cost at the supplier level. Select items with a high-profit range, create your supply, and start selling on eBay.
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