10 Products With Big Mark-Ups

Mattresses
Is $3,000 really the cost of a good night's sleep?

Anyone who has ever shopped for a new mattress can probably attest that finding a suitable one in the $1,000 range takes a fair bit of searching and haggling.

In part, that is because retailers often hike the price tag 100%. In part, it is a markup used to cover sales commissions. It also gives the needed wiggle room for sellers to deploy a popular tactic -- big, colorful signs announcing 30%, 40%, even 50% off. Slight product variations and store-specific brand names make comparison shopping hard to do.

The website The Mattress Scam -- which, as the name suggests, is critical of the industry -- gives its own rationale: Sellers charge more because they can.

"When consumers are found in the mattress section of a department store, or in a dedicated mattress store, they are more likely to be serious shoppers than those found browsing in other stores," it says. "For example, many people all day long browse through electronics shops, clothing departments, sports stores and so on with no real intent of buying something. Nobody browses around in the mattress department. Nobody visits a mattress discount store unless they are going to be buying a mattress real soon. Mattresses are boring, ugly, and not many people really know much about them. Shopping for a mattress is not fun and many just assume to get it over with as quickly as possible. A mattress is a mattress to many folks."

Cosmetics
Looking good doesn't always come cheap.

The cosmetics industry is worth $50 billion in the U.S. alone. Like jewelry and fragrances, buyers pay 50% or more over wholesale costs because they have an affinity for a particular brand. The color, style and "label" attached to a particular facial, body or hair product adds as much to the price as the blend of oils, minerals and coloring.

Movie snacks
The Stanford Graduate School of Business and the University of California at Santa Cruz conducted research into the pricing of movie concessions. Popcorn, for example, often sells at a cost that reflects a 1,000-fold markup compared with the cost of the kernels.

Among their findings were that by charging high prices on concessions, theaters are able to keep ticket prices lower.

The findings seem to suggest an answer to the age-old question of "whether it's better to charge more for a primary product (in this case, the movie ticket) or a secondary product (the popcorn)," the researchers said. "Putting the premium on the 'frill' items opens up the possibility for price-sensitive people to see films."

The researchers also point out that cinemas rely on concession sales to keep their businesses viable. Although concessions account for only about 20% of gross revenues, they represent some 40% of theaters' profits, they said. While ticket revenues must be shared with movie distributors, 100% of concessions go straight into an exhibitor's coffers.

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