Problem Solver: Top 5 retail mark-ups

The Lansing State Journal takes a look at the Top 5 retail mark-ups.

Beverages

Some of our favorite refreshing beverages carry some of the heftiest retail markups. Bottled water is wildly popular - Americans spent $16 billion on the ubiquitous drink in 2007 - and it’s wildly overpriced, considering that 40 percent of bottled water is nothing but filtered tap water.

In fact, for the price of a single bottle of Evian bottled water, you could pay for 1,000 gallons of municipal tap water. With bottled water, you’re not paying for the H2O, but rather the packaging and the convenience.

Coffee is another culprit, especially if you buy it in a coffee shop. If you make coffee at home, it costs between 25 and 50 cents a cup, depending on the quality of your beans. That same cup will cost you well over $3 at Starbucks - the same price that store might pay for an entire pound of beans wholesale (source: Markman and Batsell). Interestingly, only about 25 cents of a $3.75 latte is profit for Starbucks. The rest pays for importing and roasting the beans, milk, the cup, labor and overhead costs (source: Batsell).

But the biggest beverage markup of them all belongs to wine in restaurants. The average retail markup on a bottle of wine in a restaurant is 300 percent. The best advice: Bring your own bottle and pay the $10 corking fee.

Weddings

A diamond is forever, which is good, because that’s about as long as you’ll be paying for it. When you go to buy a diamond engagement ring, don’t expect anything close to the wholesale price. Retailers mark up diamonds between 50 and 200 percent and 100 to 400 percent for gold. The biggest markups typically are found at the mall where there are more overhead costs.

Wedding dresses retail for at least 100 percent more than the wholesale price and that slinky wedding-night lingerie will carry a 200 or 300 percent markup, too. But what really takes the cake is the cake itself. One slice of a multi-tiered, painstakingly decorated wedding cake will cost you around $15, about five times what you’d pay for a whole box of Betty Crocker cake mix.

Grocery Store Produce

Americans are obsessed with everything organic. But living the healthy lifestyle at the grocery store means big mark-ups on organic fruits and vegetables. It’s estimated that the average price of organic produce is 50 percent more than regular supermarket fruits and vegetables. The mark-up jumps to as much as 100 percent for items like organic milk and meats. Organic foods generally have higher production costs, which get passed on to the consumer.

But the biggest retail markups in the produce aisle belong to those bags of pre-cut fruits and vegetables. When you buy a bag of pre-cut apple slices, you’re paying about 75 cents more per apple for the luxury of not having to pick up a knife.

Clothing and accessories

Brand-name clothing means big-time retail markups. A study of French clothing franchises found that the average markup on clothing was 250 percent and 350 percent for accessories.

Jeans are prime targets for markups, whether they’re cheap or expensive. For example, $21.99 pair of jeans from Kohl’s still has a 112 percent markup from wholesale, while a $300 pair of designer jeans from True Religion can boast a markup as steep as 300 percent over cost.

Eyeglasses carry astronomical retail markups. Some opticians charge 1,000 percent over wholesale for designer frames. The worst prices are at the mall or other chain stores where there are many other costs built into the price of the frames. If you already know your prescription, one option is to buy your glasses online. But then you’ll never know how goofy you look in those square-framed turtle shells until they show up in the mail.

Concessions

Nothing makes a retailer’s eyes shine quite as much as a captive audience. When a consumer has no other option, he’ll pay $4 for a bag of popcorn or $10 for a dinky cheeseburger. This is why concession food - the snack food stuff you find at the movie theater, the state fair and along the boardwalk - is so incredibly expensive. You’re trapped and they know it.

Popcorn is brisk business. If you set up a popcorn cart in a well-trafficked neighborhood park, you can mark up your salty treat as much as 500 percent a bag. At the movie theater, people grumblingly pay popcorn premiums of 1,300 percent.

FunFoodProducts.com lists some admirable profit margins for a few of its concession products:

>> Nachos: 47-64 percent

>> Corn dogs: 82-89 percent

>> Ice cream in waffle cones: 84-90 percent

>> Snow cones: 92-97 percent

All these hyper-markups are enough to make you want to sneak your own bag of popcorn into the movie theater, right. Just don’t make it from one of those microwave bags. A three-bag box of microwave popcorn, which costs well over $2, contains about 10 cents of actual kernels.

Follow Problem Solver Larry Collins on Twitter: CollinsNews