Have you ever felt like you’re paying a small fortune for a simple product or service?
Markups refer to the amount added to the cost of production to determine the selling price. While some markups are reasonable and necessary for businesses to thrive, others can be exorbitant and have a significant impact on consumers.
Avoid paying high markups and make more informed purchasing decisions by reading this article.
Products with high markups
1. Wedding attire/flowers
The wedding industry is notorious for inflated prices. Wedding dresses, tuxedos, and floral arrangements often come with steep markups, taking advantage of the emotional significance attached to these special occasions. Instead of going the traditional route and risking emotional and financial manipulation, consider visiting boutiques at Far East Plaza and City Plaza to purchase gowns from $180, or opt for home-based gown rental like Right For You Bridal starting from below $100.
2. Alcohol, bottled Water, and coffee
These everyday beverages often carry high markups, primarily due to branding and marketing efforts. The cost of production for these items is relatively low, but consumers end up paying a premium for the brand image and packaging. You can thwart high markups on beverages by using a reusable container to avoid purchasing bottled waters or expensive coffees.
3. Graphing calculators
Despite the relatively simple technology involved, these calculators are often sold at prices that far exceed their production costs because only specific models approved by MOE are required for school. Many students have turned instead to Carousell where you can get it for around $75 instead of $170. If you already own one, try taking good care of it so that you can recoup some of the losses by selling it.
4. Added cheese
Thanks to a viral TikTok where New York City resident Dafna Diamant vented about her date who allegedly complained about the $3 upcharge for adding cheese to his burger, the world became aware of the outrageous prices some restaurants charge for a simple slice of cheese on top of a dish. It serves as a reminder that even minor additions can come with hefty markups.
5. Designer bags
Luxury brands are notorious for their high markups. The cost of materials and production is often a fraction of the selling price, with the brand’s reputation and exclusivity driving up the value. Luckily, we now have reviewers like Tanner Leatherstein on YouTube to give us insight into whether leather products are worth the price tag. Just look at his YouTube Short on whether Coach bags are worth it.
6. Pre-cut produce and meats
Convenience comes at a cost. As expected, pre-cut fruits, vegetables, and meat products are often sold at a significant markup compared to their whole counterparts.
7. Mattresses
The mattress industry has long been associated with high markups. With extravagant marketing campaigns and complex pricing structures, consumers often end up paying inflated prices for a good night’s sleep. While some may think that no amount is too big to pay for a good night’s rest, what you’re paying for may not be quite worth the price tag.
8. Insulin
The soaring prices of life-saving medications like insulin have gained attention in recent years. Pharmaceutical companies have faced criticism for excessively increasing the prices of essential drugs, making them unaffordable for many consumers in need. Not only do diabetics have to fork out S$100 after subsidies for regular checkups every three to six months, insulin injections can cost anywhere between S$16.90 and S$120 per cartridge, according to a list of common medications for diabetes compiled by the Pharmaceutical Society of Singapore in 2020.
9. Name brand anything
Whether it’s prescription drugs, breakfast cereal, or spices, name brand products often come with higher price tags compared to their generic counterparts. Consumers pay extra for the brand’s reputation and perceived quality.
Read more: Inflation Could Creep Into Your Retirement Plans. Here’s How To Prevent That
Factors that contribute to high markups
Several factors contribute to the prevalence of high markups:
1. Cost of production
The cost of raw materials, labour, and manufacturing processes plays a significant role in determining markups. If the production costs are low, but the selling price remains high, it indicates a considerable markup and that perhaps other factors are making your product much more expensive than it costs to make.
2. Marketing and advertising costs
Extensive marketing and advertising campaigns can significantly increase a product’s selling price. These costs are often passed on to consumers, who ultimately pay for the brand’s promotion and image, which explains why name brand items are much costlier.
3. Retailer profit margins
Retailers aim to maximise their profits, and sometimes that means marking up prices. While they incur expenses like rent, salaries, and overhead costs, excessive markups can lead to inflated prices that consumers end up bearing. According to ValueChampion, mattress brands such as Sea Horse, Tempur, and King Koil make a huge gross profit margin of around 50% on their products.
4. Monopoly
In certain industries, a lack of competition can allow companies to charge higher prices. When consumers have limited options, companies have more leverage to set prices at their desired levels, resulting in higher markups. An example in Singapore is the provision of cable and internet services, such as in the case of SingTel in the 1990s. The lack of competition allowed the company to charge higher prices and maintain higher profit margins, which is why the government started encouraging other telcos to enter, competing for better prices for consumers. It’s also the reason why prescription drugs with limited alternatives have a high markup price.
High markups hurt consumers
Excessive markups can eat into consumers’ budgets, making it challenging to save money for other essential expenses or financial goals. Paying a premium for everyday items reduces the amount available for savings.
When consumers are unaware of high markups, they may end up spending more money than necessary on products and services. This can lead to financial strain and prevent them from reaching their financial objectives.
Paying inflated prices for certain products means having less money available for other necessary expenses, such as housing, education, healthcare, and leisure activities. High markups can limit consumers’ purchasing power and overall quality of life.
Read more: What Is Buy Now Pay Later and Should You Use It?
How to avoid paying high markups
1. Shop around for the best price
Before making a purchase, take the time to compare prices from different retailers. Online shopping platforms and price comparison websites can help you find the best deals. Don’t hesitate to explore international options as well, as certain countries may offer more affordable prices for specific products.
2. Buy in bulk
Purchasing items in bulk can often lead to significant savings. One way to find bulk deals is to look for sales and promotions at supermarkets, hypermarkets, or online shopping platforms. Retailers often offer discounts or special offers for buying in larger quantities.
Before buying in bulk, it’s essential to assess your needs and ensure that the products are suitable for your consumption or usage patterns. Perishable items, for instance, may not be suitable for bulk purchases if you can’t consume them before they expire. However, non-perishable goods like cleaning supplies, toiletries, or staple foods can often be safely purchased in large quantities.
3. Consider generic brands
A generic brand is a “no-name brand” that does not have a unique branding strategy, thus they are able to save on packaging and marketing costs. Generic or store-brand products often provide comparable quality to name brands at a fraction of the price. Don’t be afraid to try them out and see if they meet your needs.
4. Be aware of high markups
Stay informed about the prices of commonly purchased items and be cautious of excessive markups. By being aware of the typical pricing range, you can better assess whether a particular product’s price is reasonable or inflated.
Conclusion
It is crucial for consumers to be aware of high markups and their potential impact on their finances. By understanding the factors that contribute to high markups, recognizing products notorious for excessive pricing, and following some money-saving tips, consumers can make more informed purchasing decisions and avoid paying inflated prices. Remember to shop around, compare prices, and consider alternative options to ensure you’re getting the best value for your money.
Read more: 5 Tips for Overcoming Emotional Spending
