Why do many department stores seek a markup of about 30 percent when some discount houses operate on a 20 percent markup?  

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There are reasons why department stores charge more than discount stores. First, department stores generally have higher overhead costs associated with operating their business. Many department stores seek to cater to middle- and upper-class customers who are looking for brand-name merchandise. That merchandise costs more to stock, and also carries a higher price tag as much for psychological reasons as for any other reason. Believe it or not, there is no shortage of consumers who feel that they are buying a better product based solely on that item's higher price and logo. Some consumers simply prefer the cachet of adorning themselves in higher priced, brand-name goods when cheaper, generic versions are available at lower-cost stores.

In contrast to department stores, discount stores target a demographic that wants lower-cost items and is not particular about so-called prestige factors like labels associated with higher-cost items. To such consumers, a pair of athletic shoes that bear...

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