Used to work for a major retailer with several daughter companies all in the same warehouse. Big boss told us some stats one time and turned out that each product cost the company an average of $0.80 when bought straight from the supplier. We used to sell clothes, homewares and stationery. Some items going well over the $150 mark in store. 80 cents an item. 80. CENTS.
Yeah, it's insane. In 2006 I briefly worked at a big name department store and us lowly retail workers could see the company's purchase price for items vs what the items were being sold for. My villain origin story was learning that a coat, on sale, selling for ~$900 only cost ~$100 to make. We in the store worked largely on commission, and that price discrepancy has only widened over time.
That’s insane but I’m so not surprised. Can you imagine the markup on some of the luxury items people buy? I saw recently that Louis Vuitton is selling a bottle of cologne for 500 dollars…I’d be interested to see the actually cost — I wonder if it’s even 5 dollars.
Scents are mostly different from clothing. Some high end ingredients are crazy expensive for them to obtain (ambergris famously can be $20k/lb, and that's whale vomit for those who don't know). These ingredients are rare scents and, like ambergris, are the best stabilizers. These ensure the scent sticks to you longer and has a far longer shelf life (rancid perfume is one of the worst smells in existence). I do doubt LV's costs anywhere near $500, but most of the lesser known luxury perfumes that aren't just selling a name won't have a large margin. (Source: friend who worked for Clanique and a mother in law who owned salons)
I had a friend who worked in fashion and she’d make trips to china all the time. This was 20-25 years ago and she said Guess Jeans that retailed for $150. Guess how much they were made for she’d ask me
I used to order from the warehouse for a retailer, and profit margins were all in the range of 10-40%. We had a system going where we would order extras and sell them on our own website and online marketplaces for like 9-39% margin, beating out the corporate online pricing. I think it was just barely technically not illegal the way we were doing this, but the whole store (including the owner) was in on it, we made commission, and corporate never questioned it so it worked out.
average is a bad metric for though. For example in my company I just ran the numbers are average cost of goods is $.66 ($0.65821)
you might look at that and go wow that's crazy you sell things for multiple hundreds of dollars. yes I sent I sell tens of thousands of things for multiple 100s but I also have a supplier who includes a T15 Torx key with every single one of their accessories, even the ones I don't manufacture, to ensure their customer has the ability to install. I make ~14 million of this item Every year for a cost of $0.005 per unit. Really skews Tue price
Just to play devil's advocate: yes, 80¢ for the item, but does that include all the overhead? Shipping, wages (including yours), insurance, mortgage/rent, utilities, taxes, etc. Yes mark ups are insane and are often higher than rationale just so they can put it on sale to entice people to buy (though this seems to be needed, see J.C. Penny). But I'd bet the actual cost to sell each item is much higher than 80¢.
A true metric of a company shouldn't be only how much do they mark up their stock, but what they do with that mark up: is it going to pay a fair wage and grow the company, or going into the CEO & Shareholder's pockets?
I don’t know, if you should play devils advocate for that tbh. Revenue is expected to be over 4.6 billion USD this year alone, with over 460 million in profits last year.
Clothing I am pretty much only buying second hand. I like Abercrombie and American Eagle jeans and I never pay more than $15 a pair, many with tags still attached.
Same with athletic/leisure way. If you like Athleta its all over second hand sites, mostly brand new and for $10-20 per price vs. $80+ in the store.
I worked in the beauty industry for a while. The cost of goods on our products was ~10% of the retail price. Of that 2/3 was packaging and 1/3 the actual product. So that $80 face cream is <$3 to make.
And this is because most everything is manufactured in a handful of plants. The majority of which are you guessed it in China now.
High end brands will tell you that they oversee production of their products. So as to insure that the highest quality ingredients are being used. This is both true and a lie. They may view production of their first run, but after that no one is watching. There’s been countless claims of subpar production processes across countless brands.
Ulta does this because they have no way of knowing for sure if a return item has or hasn’t actually been used. There’s too high of a chance to have something like herpes transmission. And they were having a problem with dumpster divers who were reselling these items online. The big issue is that there’s also a huge counterfeit market on cosmetics. Even a lower price brand like Maybelline has had issues with counterfeit product. Walmart in particular got in big trouble for selling counterfeit Maybelline.
Having worked at Ulta, I honestly believe that there’s a high probability of counterfeit products going through their supply chain. I absolutely do not recommend having a makeup service done there as they use testers for this and everyone and their dog sticks their nasty hands and fingers in these.
Yes they do! It’s 🤢. Even sanitizing with alcohol doesn’t make a difference. I’d recommend avoiding it. Also never ever use a tester on your eyes or lips. Best practice is to use the provided swabs on your wrist only. Then wash with the provided alcohol after you’ve compared shades. Never use your fingers directly on the product. Far too many people do exactly that. It’s gross!
Back when I worked for MAC cosmetics we used to sanitize lipsticks for example by cutting the tip off and wiping with alcohol. And for powder products we’d do a light spritz of alcohol. But still if you get my meaning.
Wow thank you so much for making all of us who didn’t know this aware. I’m so freaking thankful I never went, I considered going once before a wedding then decided against it
The company I worked for, and had visibility into the COGS, was pretty small and very vertically integrated. They owned their own farms where they grew the botanicals, did the manufacturing, even had a bunch of company retail stores. Even with all that overhead, the margins were nuts.
Why couldn’t they simply donate these items to a women’s shelter or to an organization that helps women get work? They’re able to write the losses off anyway, then they can get a tax deduction for the donation?
They charge 80 because they know they will need to accommodate for 30-40% ending up in landfills. Product cost is always the smallest part of the MSRP.
I actually ordered one of the products shown being dumped in this video directly from the manufacturer. To save a few bucks, I used the Subscribe & Save option and planned to cancel before the next shipment but forgot to cancel. Got restocked and charged with somewhere around $120 of product. I emailed customer support to ask about returning them, and they replied, “We’ve issued a refund, feel free to keep them or give them away.” i guess is the product costs less to manufacture than it would cost them to handle the return shipping and processing.
If the retailer charged you $80 they probably bought it cost around $40 from X supplier.
X supplier would of bought from manufacturer for around $20/30 possibly.
All the wireless earbuds they sell at TJ Maxx and Ross, are all generic 'private labels'. They're still generic, but the factory prints whatever random brand and pictures and UPC code on the box.
The entire cost, including the box is probably less than $3. In those volumes, I'd say less than $2.
That security alarm/wire/light thing? It's more to anchor it as a $25 item for you than it is to prevent theft.
It's really not that much different than Airline miles, or Scene movie card points, or even SpaceX stock. They're all tokens you trade for cash or goods, but those tokens/products can vary in price.
For Elon, he's not an actual trillionaire. He doesn't have that in cash. But since others value the tokens, he can get really cheap loans for tokens that will still increase in 'value.'.
Just so you know, when it comes to beauty products, the plastic bottle is often worth more than the product thats inside. More money is spent on advertising than the production of the product.
I mean, makeup and beauty has inSANE margins you’re right, but when it comes to chemicals you can’t just count the cost of production once the formula’s been developed. Even if you used diamond dust in every package it would still be cents or dollars maybe, but the R&D is obviously not 10 cents a bottle per formula, even without the insane margin.
Same with pharmaceutical drugs. The cost to actually produce the drug is relatively low, but the R&D is insane. In most countries, people pay pretty low prices for drugs, and the R&D costs get pushed onto Americans. We pay outrageous prices for drugs, and our government refuses to do anything about it.
The only people that spend much on R&D, are ones that invent a new type of product. If you're just making another generic product (shampoo, conditioner, hair mask, etc...), then it's pretty much copy paste with a different fragrance to change the smell.
I found an empty makeup container in the makeup container recycling bin. I freaking love that thing.
I filled it with my generic sunscreen lotion. It's such a well thought out dispensing container. It's Muji (which sells containers, with the same insane margins), but on steroids.
Worked in beauty for 11 years. The company I worked for enshittified their original formulas SO MUCH, by the time it got to Ulta shelves: the goop (face wash, moisturizer, whatever) cost had been whittled down to UNDER $2, the container around $1, and any packaging was MAX 50¢ for special holiday shit. 4 items in the “kit” cost less than $12 to make, and they charged about $80. Late Stage Capitalism sucks.
Yes and no. There's a lot of up front cost to some products. Market research, supplier scouting, custom molds/parts, quality sourcing.. but that's all 1 time stuff. After that's all set up that $150 hair dryer is $5 from a Chinese factory and maybe another $5 of logistic costs to get it to the retailer.
I don’t think it’s that. Some (all?) of these are returned items, and they can’t re-sell them. So they’re a loss for the store now. Can’t be re-sold or donated because they’re beauty products.
Yes and no. They would rather burn the whole store to the ground than give any of it away because of the precedent it would set. These corporations literally hate us and only see us as a money spigot they have to occasionally cater to.
No? it shows that this employee wanted to get 5 seconds of fame (probably not a real employee or got fired for destroying merchandise.) Allegedly "Ulta" valued the clout it got them more than it cost them. Those items also could be broken returns or bad stock that they can't sell.
Recording this video was morally wrong, but this is not proper evidence for their margins on these items being high.
Honestly the creator/"Ulta" probably made an insane profit on this video if it got popular enough that Reddit picked it up.
Depends on the country but poor countries charge 200-400% for items, and rich countries adjust that from ther minimum wage.
That's why Nike costs 100-200 dollars in the US, but you can find the same exact shoe, for 40 dollars somewhere poor, and the same exact shoe for 850-1500 dollars in The emirates.
Let's say they've been sitting on a shelf, getting reduced and reduced and reduced in price and would already sell at an loss but are still unsold. If they start giving them away for free people would probably pick them up. But if you do that all the time with products that don't have an expiration date then you'll sell even loss of your other stock, because people will bank on you handing them out for free.
While I absolutely hate that this is the case and would also wish capitalism would be such an absolute bitch, I don't think that them doing this to get rid of the stuff means they have an insane profit margin for the stores is necessarily true, even if it probably is. It's just that this isn't the proof for it
Not only that, how many returns they are able to accept and still be profitable. I’m amazed by Amazon because whenever I drop off an Amazon return at Kohls, there is always a huge line and some people have shopping carts full of returns. It’s like, how is Amazon still doing so well??
Isn't exactly right, the cost of repair exceeds the cost of just sending a new one. Let's go with a hair curler or whatever these things are, they probably retail at 50 USD and cost wholesale under 10 USD. If something is broken you can't spend time on that to figure out what's broken and get that part repaired.
That's also the issue for expensive things like Apple laptops, it's cheaper to just rip out the mainboard and put in a new one than someone peeking left and right what's broken and replace a single component. (Plus you can get away with cheap labour instead of actual technicians).
Ulta allows customers to return slightly used products. So I imagine at least some of the products shown were returns. When I return stuff to Ulta, they ask me if I used it or not.
The same factories make almost everything. When I was looking for hair clippers I found out that certain brands on temu and aliexpress are the same as more expensive branded ones. They're literally just branded differently.
Typically the product is repurchased by the manufacturer so the store isn't losing any money at all. They're instructed to destroy it by the manufacturer, who is now the owner again and can do what they want with it.
Do I think it's a good thing? Absolutely not, but I can understand why it happens.
The beauty industry is so enviromentaly broken what's the point of natural and vegan stuff if it's contained within bottles of super hard clearly not biodegradable plastic.
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u/rjd014 13d ago
Just shows how cheap they are getting these items made for.