Response to Sean's Question: What's the best way retailers can achieve a healthy profit margin?

I agree with Sean’s post. When I purchased clothes I never thought about the stores profits or how they attained the price they post on the tags. What I think about most is if a price is too high or if it is a good deal. This is how most shoppers determine if they will purchase a product, based on satisfaction and perceived value.

I think the best way retailers can achieve a healthy profit margin is not to begin with too overpriced items. This way more customers will be willing to purchase the items at full price and will be less likely to wait to purchase the item when it goes on sale. Typically stores still make a profit even on sale items because other customers have purchased the product previously and the markup is so high there is still room for profit. However, like Sean had mentioned this is not a healthy profit margin to only rely on discounted sales and the previously made sales. Stores need to find the perfect balance so most of their inventory is sold at few price and the leftover from each season is sold at a discount so the retailer still earns a healthy profit margin.

What if all retailers stopped marking up their prices over 200% from what it costs to produce them? Do you think the industry would benefit from this or in the long run be damaged?