Understanding Product Markups
High markups are often seen in luxury goods, convenience items, and products with high production costs or brand prestige. For example, designer clothing, greeting cards sold at hotels, and bottled water carry high price markups compared to their actual production expenses.
By being aware of these markups and the reasons behind them, we can become savvier customers. When possible, avoid buying products with excessively high markups. Consider cheaper alternatives or try negotiating if an item seems overpriced.
Develop smart long-term spending habits and save money that can pay off debt or build savings.
Grocery Store Markups
Pre-Cut Produce
Pre-Cut Produce has the highest profit margin. A recent survey found that the price of groceries as a whole has gone up by 2% over the past year, while the price of fresh vegetables has gone up by about 3% over the same time period. It’s more important than ever to find ways to save money, especially on produce, which is one of the most expensive parts of grocery shopping. This means we shouldn’t buy fruits and vegetables that have already been sliced, diced, or chopped for our convenience and then marked up by an average of 40 percent more than their original price.
Name-Brand Cereal
Name-Brand Cereal has an average retail markup of 43.5%. Paying for design and packaging rather than taste is a common trap. With that in mind, get in the habit of comparing ingredients between your favorite name-brand cereal and the less expensive generic brand. You may notice that the ingredients are nearly identical, but the cost is 30 to 50% lower.
Sales and Markups
You can often tell whether a product has a high markup if it’s always on sale. Classic examples of goods that are on sale throughout the year include clothing, shoes, designer handbags, jewelry, furniture, and mattresses. Low markup consumer goods include:
- Small appliances (30%)
- Large appliances (15-20%)
- Automobiles (5-10%)
- Automobile accessories (15-25%).
Restaurant Markups
These foods have the highest markups in restaurants:
- Drinks (wine, cocktails, soda)
- Pasta
- Edamame
- Fried Rice
- Eggs