General Retail Business Issues/Mark up's

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Question
Hello

I've read a lot about clothing mark ups and 50 percent seems to be the norm. We have a product we paid $3.41 for so to me our sell price should be $5.12. Does that include everything ? If so wow,, what about rent for the shop, taxes, payroll ? Is that all included in that $5.12 ? If so, we'd better sell a lot !!

Thank you so much !!

Answer
Ken,
Good question! First of all, the "standard" margin in fashion clothing today (H&M, Zara, Top Shop etc.) is closer to 60%+. And the margin is always expressed as a percentage of Selling price not cost. In your example above the selling price at 50% margin would be in essence double cost or $6.82 likely rounded up to $6.98 or $7.00.  More realistic would be the $3.41 cost at a 65% margin which would be $9.74 or $9.98 selling price. That is how you pay the rent!  Also, I trust that the $3.41 cost is not indicative of your average cost price, if it is, yes you will still need to sell a lot of units to pay the rent!
The formula to determine price is to simply take your cost and divide it by the reciprocal of your margin (what number added to your margin would equal 100%) So if you have a cost of $4 and you want to make 70% margin, you would divide $4 by .30 (30%). This would give you a selling price of $13.33 which again, you would either round up or down to a regular retail price.  

General Retail Business Issues

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James E. Dion

Expertise

Most questions about trends in specialty retail, how customers are changing both in the US and Europe. Demographics for all countries as they relate to retail trends and issues. Store Operations, Buying and Merchandising.

Experience

Over 40 years in the retail industry, store level, store manager, buyer, merchandise manager, Vice President.

Education/Credentials
BS Psychology, MS Psychology, PhD(abd) Industrial Psychology Illinois Institute of Technology

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Microsoft, Harley-Davidson, Ritz-Carlton, Hummer, Williams-Sonoma, Ace Hardware, Coleman Spas, Aldo, Intel, Dell, Safeway, New Balance, IBM, Kodak, Bata International, Nortel Networks, Honey Baked Ham Co., Man Alive, Highsmith
B.S Chicago State University M.S. Chicago State University PhD (abd) Illinois Institute of Technology

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