IT's Most Outrageous Markups?

masteritrit asks: "I have seen some really outrageous markups from IT companies. Cisco sells memory for a router I have for $1500 bucks and I bought it directly from Kingston for $56 bucks. I also had someone at storagetec accidentally reveal that their standard markup is 700%. What are some examples of this that others have seen and how do you feel about it?"

Comments

CompUSA Prices

[xWeston]

When i was a salesman at compusa (a few years back) we sold USB cables for $30+ when they were only $5 or so at cost. I've seen grocery stores selling them for much less than $30. The same thing went for parallel printer cables.

However, there was one adapter (PS2->AT or serial->ps2, i forget which) that we charged ~$50 for when it was listed as $.50 cost in the computer... 1000% profit is not bad.

Re:CompUSA Prices

[Murdock037]

I was a CompUSA drone for awhile there, too.

As I was making price tags for the cable aisle one day, I starting comparing retail and cost. On average, the markup of cables was around 1800% of cost. I'm not exaggerating.

It's a ripoff, yeah, just like those huge CD binders for which they charge $50, but pay $15, or most anything in the Accessory aisle.

It's not totally unjusified, though-- the reason cables are so marked up (and the reason they try to push them on you) is to make up for very low profit margins elsewhere in the store.

The average profit on, say, your average Compaq box is something like $50. If one of those walks out of the store without being paid for, you've gotta sell fifteen more to make up for it. Factor in employee costs and whatnot, and they don't really make any money selling computers. (This made it especially aggravating when Joe Schmoe thought he could haggle prices on the things, as if it were a car.)

Anyways, I'm not apologizing. They're still ripping you off, if all you need is a cable.

On the last day before I quit, I went through that same cable aisle and bought one of just about everything on the shelf-- employees could buy everything at cost. I figured that paying $50 for twenty cables in advance would be better than paying the same for two cables down the line, when I would be desperate and without the discount.

Re:Video-game companies

[KMAPSRULE]

Glucometers for Diabetes are the same way, in a lot of cases the companies Give the meters away because they know that they have you trapped buying the test strips for $50.00 for a bottle of 25.

Double is standard

[bluGill]

Don't forget the cost of doing buisness. If you count only the cost of food, McDonald's as a 200% markup. Food and labor is about 100% (these two were about half the costs in the resteraunt I worked at). However after all the other little things add up, profit of 5% not obtainable no matter how hard we tried, and some months we lost money. Overhead gets you every time...

I used to work at StorageTek, and I don't know if I believe the 700% markup. Only because how do you figgure that. If just the cost of making the parts, that is beliveable. They don't have a lot of volumn (compared to say DELL), but all their systems have a lot of engineering in them, so they have to recover a lot of costs from each sale. I know many smaller products never directly became profitable, and were only worth it because they helped drive a bigger sale.

I don't think Cisco wants to be in the RAM buisness. They are used to selling either big machines for a lot of money, or small machines to re-sellers. Call them up for a $50 ram module, and they may have more than $50 in overhead just to answer the phone, get it off the shelf, and ship it. The salemen selling it may require more than $50 himself just to make it worthwhile to write up the stupid order. (time is money, and that time could be spent trying for a big sale) Call them direct and you might get a vice president more inclined to sell in lots of 1000 than single lots, and you have to pay for his time. Their processes don't support selling memory, but they know they have to. They charge to make up for their process, plus some extra to either profit or make you go elsewhere. (one other point is they have to keep memory for old systems around ever after it is hard to get, you may be paying for an assumption that they have made their last order of that part and have to conserve inventory)

Buisness is complex. That doesn't excuse you from not looking for the best value. Don't buy the expensive parts if a cheap one is just as good. Unless your time itself is worth more than the effort it would take to find a cheaper supplier. If you are a high level executive, getting memory from Cisco may be a better use of your time than searching for memory suppliers. I could find them on google and 5 minutes latter have the order done, but if you don't do that I could see it taking 20 mines, which means the executive would need to make $250 an hour - cheap for a CEO. (though why a CEO isn't telling an underling to do the job I don't understand - something they should know how to do in one minute)