Why do department stores charge 30% markup while discount stores do not?  

1 Answer

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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There are a number of reasons for this.  Among them are:

  • Department stores have higher costs.  They typically pay more for things like advertising.  They have stores that are decorated more elegantly and have more open floor space.  These make their costs higher and require them to mark prices up more.
  • Department stores need to have a reputation for quality.  Many consumers equate price and quality.  Prices that are too low would erode a department store's reputation.
  • Department stores have better reputations and can therefore charge higher prices.  People think a department store is superior to a discount store and expect higher prices.  This means that a department store can get away with higher markups while discount stores have to keep prices as low as possible.