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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?"
Would everyone who just though of mentioning SCO's markup of 699% please add their post below.
And before the trolls turn up, I know 699% of nothing is nothing, but it was the best I could do at this time of night.
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.
Well, pretty much any cpu you buy is going to be marked up pretty heavily.
It costs Intel or Amd the same whether they are making a 1ghz or a 3, the differences in prices are just their way of recouping development costs.
And of course, specialty cpus are marked up anymore, for example Athlon MP's.
I would expect such blatant racism on Fark, but on Slashdot? Mods please ban this asshole.
But XML markup is the worst!
Karma: Marginal (mostly due to the border around the website)
I would absolutely *LOVE* if someone could tell me how much both USR and retailers are making on external 56k modems:
Future Shop (Canada's version of Best Buy) is selling an external one for $170 CAD (~$120 USD?). It seems hard to believe that the price of one hasn't come down in what, over half a decade?
Here's an opposing view (Scroll down to the second-last letter - lucky b'stard).
Consultancy: If you're not part of the solution, there's money to be made in prolonging the problem
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.
--Im an oven mitt, not an engineer! (SLArbys Radio Commercial)
That $1,500 Cisco memory is, I think, good for everyone - it contributes to Cisco's bottom line by ripping off the ignorant and lazy, thus keeping them from having to raise prices for the rest.
But for a contrasting situation: about 5 years ago I worked for a dominant office-equipment supplier in the Rocky Mountain region (name left out not to protect the guilty, but to avoid self-embarassment...) in their PC/printer repair depot. We outsourced our monitor repairs, and would routinely double whatever the price was - whether it was mainly parts or labor - for no good reason other than that we could. We sold Laserjet fusers for a decent markup - until we changed from geniune HP to remanufactured parts, and kept the prices the same... so a $180 fuser we sold for $215 became a $40 fuser sold for $215... I could go on. They did that 'cos they were sleazy, and I hated working there.
I've been on the lookout for a 4-pin to 4-pin Firewire cable at a decent price for awhile now; usually I see them for a ridiculous $40-$50 most places. Recently when my need became more urgent, I swung by Fry's and found them for $9. That's just a case of buyer-beware - if you're concerned about saving money, make sure you're not being fleeced before plunking down your cash. Do some legwork if the price difference is worth your time.
Another example: inkjet printer makers sell the printers at a loss and make it up by selling carts at inflated prices. That's OK by me, when alternative sources for carts and ink are available. When they started putting ICs into the carts to prevent "counterfeiting", that's where I draw the line, and it turns out that inkjet printers from 2-3 years back (available for dirt cheap on eBay and Craigslist) still work just fine with $3 cartridges (also from eBay)....
The really outrageous markups are in the financial business anyway. $35 because they let your credit card payment check sit for 3 days before processing it? Bah!
Perfectly Normal Industries
Numerous stories have been posted on this - I'm surprised "Printer Ink" isn't half of the posts here...
Hacker Public Radio is our Friend
Sun Microsystems is notorious for charging way too much for their products...so much so that some times their resellers and channel partners sell the same products for 200% less. They need to get their act together.
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One is born into aristocracy, but mediocrity can only be achieved through hard work.
AMD/Intel *do* incur higher costs for the faster chips of the family.
When a wafer of silicon comes out of the FAB, they test each chip to see what it can handle. Chips that can only do perhaps 1200Mhz without failure will get marketed as 1 Ghz, 1.3 Ghz as 1.1 Ghz, and so on. This ensures the chips are reliable at their standard clockspeed, and ensures the 3Ghz+ wafers go to the higher end parts.
Obviously, they only have limited control over this process, and when demand for a lower-speed chip increases, they may have to put a 1.3, 1.4, or 1.5Ghz rated wafer down as a 1GHz part, since people want to buy the 1GHz parts (this is also, BTW, the reason why sometimes the 1.4Ghz part is chaper than the 1.3Ghz).
As the speeds increase, you have continually smaller quantities of silicon that will run at the higher speeds, meaning if demand exceeds your supply of these parts, then you have to keep the prices higher to keep that demand in chack, and also because you may end up tossing out large parts of the wafers (This, also, is an issue when people purchase 1.4/1.5Ghz chips, and they have a glut of lower-rated silicon. They keep quite a bit of it, but eventually if the surplus grows to great, there's nothing to do but dispose/recycle the stuff).
So there *are* costs incurred with going up in speed.
...for one of our AIX RS/6000 servers. I forget the exact quote amount, but it was, I think, around $1,200 for 512MB. We bought the same RAM from Kingston for less than $400 (after the IBM rep almost blew his top arguing that if we didn't buy from him, we'd void the warranty).
So we crack the case to put in the new RAM, and what do we find? The *exact same* Kingston RAM module is already providing us with our first 512 MB of memory. Priceless.
Just for giggles when a hdd in one of laptops crapped out, I went to HP's website to find out what they had to offer, i found this $1073.00 10 gig laptop hard drive.
I just about fell off my chair laughing so hard. I think we bought an equivelant hdd through compgeeks for
wang33
PAGERANK++ Robsell.com
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)
And this doesn't even take into account the enormous profit the drug companies make on that product that costs them less than pennies to produce. You wonder why health insurance costs so much.. here's part of it. This is a case of markups in a situation where the consumer has little choice (if they are bedridden in a hospital). And this in an industry that is supposed to be helping people (and a non-profit at that). Abuses aren't necessarily limited to the likes of SCO. At least most of the time in the IT industry you have a choice as a consumer.
Those of us that used to make redboxes ended up paying 25 bucks for the 33 memory tone dialer and another 5 for the new quartz timing crystal. When I was busy making and selling about 50 a week, I found a better source at asiansources.com and started getting them from the same place RadioShack ordered them from for 3 bucks a piece quantity 100 without the lame RadioShack logo on them. The quartz timing crystal I found for 49 cents a piece but I can't remember where. It's been too long. I never could find a great price for mercury switches (the only way to do it right) but my boxes looked completely normal from the outside so they were worth it. :)
For every annoying gentoo user, are three even more annoying anti-gentoo crybabies. Take Yosh from #Gimp for example.
"Informative"? This is nothing new.
If all this should have a reason, we would be the last to know.
The pack might only sell for 0.25 - but they gotten for about .0025.
I have mod points and I am not afraid to use them
I actually paid $150 for a copy of Windows. Can you believe it? $150 for an operating system? It must've cost about $0.05 for the media, plus a few bucks for the programmer who copied the code from VMS, BSD, and MacOS.
Believe me, I never made that mistake again!
No lie - we needed an HP heatsink to replace one that was (ahem) "dropped". Turns out that the heatsink costs $3 more than the processor (P3 1Ghz) itself (which CAME WITH A HEATSINK).
I just don't get it.
The question seems to be talking about gross markup in I.T., the problem is I.T. is a very funny business where almost all the cost is in figuring out what to buy. A particular cable or part may cost 25 cents, having someone around that can tell the customer that its the cable they need is not cheap at all.
If the part is to be installed on site the actual profit becomes much less. There seems nothing a customer loves more than wasting a field techs time with little things after the paperwork has been filled out.
Oh and for most markup I once charged a customer $300 for a 20 cent fuse for a printer. Call it penalty markup for plugging the thing into an outlet I insisted was bad.
Listen dudes, just because it's got a high percentage of profit, doesn't mean it's a rip-off. It's an example of supply and demand. If $5 USB cables are being sold for $30, then it's because enough people are spending $30 a piece to buy them. When people stop paying $30 a piece, the price will drop.
It really is important to understand this concept of business. Just because they can sell it cheaper doesn't mean they should. Remember, they're not just selling you small quantities of material, they're selling you a tool that helps you do a job.
"Derp de derp."
Some big name electronic stores have manager/salesperson quotas on how many extended warranties are sold, with the idea being that you slim your margins on an electronics item, and get it back on the warranty.
The Future Shop stores I've been to here are fairly pushy with their warranties. I purchased a $500 digital camera and was asked twice by the clerk why I didn't want an extended warranty. Then the clerk went to the manager who approached me and asked me why I didn't want a warranty. If the store is doing this for the customer's benefit, then they're most likely not going to bug you about it unless they can get something in return.
So I do take a chance when I go without paying $50 on a $500 camera for 2 more years of warranty, but at the same time, when I use my CC to buy it, my warranty gets doubled by up to a year anyway. What are the odds of it breaking in year 3 as opposed to 1 and 2? On top of that, my $500 camera would probably cost $150 come year 3.
If I found a set of electronic gizmos breaking down in year 3 from a certain manufacturer, I just wouldn't buy from that manufacturer anymore.
the big problem is that hardly any shops beleive that this is true (or refuse to honour it without being taken to court) but it is part of UK law. here is a FAQ entry from the UK gov trading standards page as example:
so guarantees and warranties are all very well, but the good old "sale of goods act" does alot more for the consumer, if only he knew it existed (and can argue the shop manager into beleiving that it carries weight and that he will lose if taken to court).
dave