MINNEAPOLIS (WCCO) — With Black Friday coming up, potential customers already starting to see some really good deals — 30, 40, and even 50 percent off. So, do stores make money on these sales? What are the markups? Good Question.
“The vast majority of sales are not below cost because you couldn’t stay in business,” says George John, a professor of retail at the University of Minnesota’s Carlson School of Management. “However, there are a few items that might be below cost because they want to attract you in the stores and, hopefully, you’ll buy other stuff.”
Often, stores will mark up items knowing they will be having sales, sales Tina Wilcox, president of Black Retail. When it comes to clothes, the markups can vary widely.
“It really depends on the category, whether it’s specialty, mid-market or luxury,” she says.
Within department stores, belts and scarves generally tend to have higher markups.
“Things that people will buy along with something core, like trousers,” says John. “Levi’s jeans probably will get very small markup.”
John estimates, on average, clothes are not marked-up more than 25 percent. He says women’s clothes tend to have higher markups than men’s because the turnover is higher.
As for electronics, John says it’s very hard to know exact pricing, but he estimates markups are closer to “low double-digit” percentages. Competitive pricing over the Internet has dramatically lowered the margins on those items and has made electronics a very competitive market.
“If it’s a hot item everyone wants, you’ll get a higher markup, but how many of those items are there,” he says.
When it comes to toys, John estimates the markups are somewhere in between clothes and electronics. The margins on that industry have changed, like electronics, because of online shopping.
According to Dick Outcalt, co-founder of Retail Owners Institute, prices tend to be dynamic and can vary by the minute as retailers use information they’ve gathered about their customers.
“Pricing by retailers is an art form, it’s not scientific,” he says.