These days, there really is no excuse not to engage in smart shopping. Between price comparison tools, apps and discounts, you almost have to go out of your way not to shop smarter.
This is especially true during the holiday shopping season. With holiday sales starting in mid-October and lasting through late December, smart shopping is even easier to do. According to a recent Deloitte study, discounts and promotions are at the top of the smart shopping list.
But even with all the discounts, promotions and tools out there, consumers are still paying considerable markups. This year, you owe it to yourself to shop smarter by never paying the retail price.
First things first. A markup is the amount a retailer charges above the wholesale price (the amount the retailer paid). A markup is how retailers make money. Sometimes the markup is determined by the retailer, but it may also be decided by the manufacturer or brand.
Let’s say a retailer pays a wholesale price of $100. They may resell this item for $200, making a gross profit of $100. This sounds like a lot, until you factor in the sales staff’s salary, advertising, keeping the lights on, etc. The net profit may be quite a bit smaller. Retailers have a strong incentive to mark up a product as high as possible. Smart shopping involves figuring the retailer’s bottom line. That is, the number that provides the retailer with a fair profit, but not one that takes you to the cleaners.
Besides standard costs like overhead, customer service, and marketing, you are also paying for things that are more difficult to quantify, such as artistry or a brand name. Another thing that is figured into the markup is how much of the stock the retailer expects to sell. Very few retailers sell out of their entire inventory, so they price their products based on volume. Markups are often higher on low-volume products.
So how do you shop smarter, figure out the gross profit of a retail price and the difference between a fair markup versus an excessive one? Smart shopping starts with using all the tools in your price-comparison toolbox. But it’s not always easy, due to a catch known as the MAP.
The Minimum Advertised Price (MAP)
The reason why you often see brand-name products listed for the exact same price at every retailer is due to the MAP. Some brands require retailers to advertise certain products, especially luxury items, at a certain price threshold. Just because a retailer can’t advertise a lower price doesn’t mean they can’t give you a discount. Smart shopping involves knowing how and when to ask for a break on the retail price.
Smart Shopping: What to Expect When You’re Browsing
To get the most out of the holiday sales and keep more of that gross profit in your pocket, we asked the pros and compiled their very best tips on how to deal with markups on high-end products.
Diamonds carry a premium because of the many steps involved in production: mining, labor, shipping, etc. However, diamonds often carry smaller markups compared to other gems because diamond pricing is readily available, which is not the case for other stones. Because so many factors go into creating a gem including origin, quality, and cut, precious stones such as rubies, sapphires and emeralds can be trickier to price.
The retail price at brick and mortar stores will likely be higher than online, especially for name brands. Shop smarter and don’t be afraid to use e-commerce. Online retailers often have lower overhead, reducing their markups. Many jewelry e-tailers offer money-back guarantees, secure shipping and even an appraisal period to allow you to verify your purchase. You may also be able to work directly with a wholesaler, skipping the retail markup altogether.
Expected markup for diamonds: 100%-250+%.
Expected markup for other gems: 100%-1000%.
Smart shopping for engagement rings happens during the holiday season. Because retailers expect to sell quite a few rings at this time of year, you can often score great deals at holiday sales.
Smart shopping for gems means going with small, independent jewelers. Their supply chain tends to be shorter, and the owner is often the designer. You’ll likely find more passion, fashion and enthusiasm in their pieces.
Smart shopping means selecting stones such as amethyst, garnet or blue topaz. They’re more readily available, resulting in a lower retail price.
Pearl markups can be quite high because there are so many different types and volume tends to be low. The length of a pearl necklace, the luster and even the pearls’ shape will affect price. In short, smart shopping involves educating yourself before buying, whether you’re buying earrings or an engagement ring.
Expected markup for pearls: 400%-500%.
Smart shopping might mean going with the more economical freshwater pearls rather than the pricier options.
The markup on gold and silver can be harder to figure out due to daily fluctuations in the market. In the case of gold, the retail price will be at least twice what the metal costs, and can be quite a bit more when it comes to silver.
Expected markup for gold: 100% minimum.
Expected markup for silver: 200%-1000%.
Smart shopping means buying simpler, timeless pieces such as elegant stud earrings and classic necklaces that you intend to keep and wear for a long time.
If you consider precious metal jewelry to be an investment, smart shopping means watching the markets so you can know the commodity’s value when you want to resell.
Smart shopping means going with a direct-to-consumer retailer such as Warby Parker. Independent brands such as Maui Jim and Rudy Project are another option.
7 More Pro Tips for Smart Shopping
1. Never Buy Retail
The ability to instantly access information on the internet is a mixed blessing, but in the case of price comparison, it’s a godsend. Manufacturers sometimes sell direct to consumers, offering higher quality at a better price. If you’ve got your eye on a specific brand, shop smarter and check the brand’s website before looking anywhere else.
2. Don’t Be Afraid to Negotiate
Remember that while many retailers must abide by the MAP in their advertisements, they still have some flexibility when it comes to the actual sale. If you’re shopping online, use a negotiation tool like PriceWaiter. If you’re at a brick and mortar shop, simply asking if they can do better on the retail price can pay off, literally.
3. Be Wary of Unauthorized Retailers
While it can be appealing to shop at a big box retailer in hopes of finding a steal on trendy drop earrings, let’s say, tread carefully. Unauthorized retailers selling brand name products at discount prices may actually be offering lemons: damaged, refurbished, used, and possibly even fake. And because they’re unauthorized, it’ll be hard for you to tell the difference… or get your money back.
4. Check Out the Outlets
Outlet shops may seem too good to be true, but they’re owned by the brands themselves. A Gucci outlet is owned by Gucci, so you know you’re getting an authentic product. The catch is that you may be buying last season’s styles or getting a product that is not quite up to snuff to command the full retail price.
5. Know Your Mindset
When spending your money on jewelry, it’s important to know if you want something you’ll treasure for years versus something that you just want to wear tonight. Understanding the difference will help you shop smarter and spend your hard-earned money in a way that best serves you.
6. Beware of Zombie Jewelry
Deals that seem too good to be true often are. Manufacturers sometimes make knockoffs of existing designs. They looks similar but are made of lower quality materials and gemstones, and may not stand up to repeated wear. Smart shopping for gifts, for example, means going with independent jewelry designers, particularly those who offer custom design services. They are the most likely to offer excellent customer care, and the least likely to stock zombie jewelry that would ruin their reputation.
7. Don’t Let Markups Get You Down
While no one wants to overpay, at the end of the day, it’s about what you want and what you’re willing to spend to get it. Smart shopping is all about doing your research, deciding on your budget and then enjoying your purchase with no regrets.
Jessenia Landrum, Founder, Jevela Jewelry
Andrew Scarbrough, Co-founder & COO, PriceWaiter
Calla Gold, Founder & Owner, Calla Gold Jewelry
Jeffrey Ten, President, Global Brand Development
Leon Rbibo, President, The Pearl Source
For more tips on smart shopping, make sure to download The Pearl Source’s full study: Markup Mayhem – Why you’re overpaying for popular products and how to land yourself a deal.