Factors Affecting Markup
Source: shutterstock.com
Below are the average retail markups japan phone number for various product categories:
for footwear and clothing: 30-100%;
furniture products: up to 40%;
cosmetics (care and decorative cosmetics): 15-70%
costume jewelry: the markup reaches 300% (sellers mark up the price the most when selling cheap costume jewelry);
electronic devices: 5-25%;
Household goods: up to 50%.
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The above figures serve as a guide for businesses in the process of calculating the markup on their products.
Competitive struggle
Highly competitive markets are much more difficult for new sellers to enter. In such conditions, companies strive to minimize their markup in order to offer competitive prices and attract the attention of consumers focused on well-known large brands. When entering the market, a business can operate with virtually no profit, leaving itself with only minimal income.
Competitive struggle
Source: shutterstock.com
In turn, in industries with low competition, where there is stable consumer demand, new sellers have the opportunity to apply significant markups in order to obtain high financial results from sales.
Demand
The main factors influencing the formation of demand:
Consumer solvency. Megacities have more high-income buyers. In the regions, consumer solvency is much lower, so the demand for expensive products is not so high.
Customer price expectations. In situations where the population predicts a sharp increase in prices for essential goods, sales of other categories of goods decrease.
Seasonal fluctuations in demand. There are a number of product categories whose sales fluctuate depending on the season. During peak periods, there is increased demand for them, which allows for high markups.
Level of product demand . Buyers primarily purchase essential and mass-market products. Premium products are distinguished by a narrow circle of connoisseurs who ensure stable demand and income.
Market niche saturation. New products are often in high demand. This phenomenon can be observed until the market segment is saturated. For example, there was a period when demand for a spinner toy grew rapidly among teenagers. As a result, at the very beginning the markup on this inexpensive item could be several times higher than the wholesale price.
Elasticity of demand . This criterion demonstrates the nature of changes in sales volumes when the price of a product changes. High elasticity of demand is typical for essential goods (bread, meat and dairy products, and medicines). They are in demand by buyers regardless of price increases, since such products have few substitutes. Most goods have low elasticity of demand, so a significant increase in price will lead to the target audience refusing to buy or searching for analogs with a lower cost.
In conditions of increased demand, sellers can sell even goods of poor quality at higher prices. This situation is more typical for seasonal products and items that are bought in bulk on the eve of holidays. For example, Christmas tree decorations before winter holidays, sleds in late autumn and early winter, flowers and perfumes in early spring, etc.
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After a surge, demand for such goods drops sharply until the next season. When selling such products, the seller can regulate the markup, increasing it before the expected sales surge and reducing it at other times. In conditions of falling demand, a business cannot add large amounts to the cost of the goods. Thus, the markup is adjusted to ensure stable sales with a small level of profitability.