No one talks much about the "economics 101" consequences of very high mark-ups. I think of the guy who wrote here of an employee meeting where Gander Mountain announced a new policy of marking everything up. The writer of this post was bewildered, said he couldn't see that this was a good business plan.
Well, it isn't.
There's a trade-off between volume and mark-up. The higher your mark-up, compared to your competitors, the more your volume will be impacted.
If you cut your mark-up to the point you are barely profitable, you will get substantial increase of volume.
Put another way, it's profit versus revenue. If you cut your prices too far, you will push revenue way up but actually be losing money.
Most businessmen walk the line, trying to maintain or increase volume while sustaining a margin that permits a reasonable profit.
One one hand, a Wal-Mart is all about minimal profit PER ITEM but a huge volume. The opposite situation would be many jewelry stores out there, who buy a watch for $50 wholesale and sell it for $300 retail. Or, look at the international diamond market for crazy mark-ups over wholesale. Buy them in Brussels, sell them to mainstreet America.