What Products Have the Highest Profit Margins?
Products with high markups exist because consumers are willing or obligated to pay the extra cost. When ordering a mixed drink at a bar, chances are good that you are about to be hit with an astronomical markup. Wedding dresses, prescription drugs, fountain soda, eyeglass frames, bottled water, restaurant wine, and other goods all demand much higher prices than they cost to make. By being aware of these markups and the reasons behind them, we can become savvier customers. Fortunately, Swagbucks has created an infographic that exposes 32 of the products with the highest markups:
What Products Have the Highest Profit Margins?
The profit margin of a product often varies depending on the location, resource availability, season, and other factors, but there are some products with consistently high profit margins. Here are some examples of products with high profit margins:
Soda
Fountain drinks at restaurants, convenience stores, and gas stations yield a massive profit. You may spend around $2.99 to get a medium fountain drink, but it only costs a few cents to supply that drink. Fast food restaurants especially make a killing on soft drinks, often earning a 90% profit margin. These high profit margins are among the reasons that fast-food restaurants can offer dollar menus and other cheap options.
Mattresses
There is a reason that there are so many mattress stores despite the fact that mattresses aren't purchased frequently. According to IbisWorld, there are 16,798 mattress stores in the United States, with a market size of $14 billion. The primary reason for so many locations is that the profit margin of mattresses is enormous. For example, a $3,000 mattress can cost about $300 to make. That is a whopping 900% profit margin! Plus, mattress stores generally only need one employee at a time, as they are not high-traffic locations.
Popcorn
Why is movie theater popcorn so expensive? Research from the Stanford Graduate School of Business suggests that the high cost of concessions actually benefits moviegoers; the more customers spend on popcorn, food, and drinks, the lower theaters can keep movie ticket prices. Since movie theaters have to share a major chunk of the profits of movie showings with films distributors, they make up for this by creating a "monopoly" by forbidding outside food and charging more for theirs. Popcorn is especially effective for making profit, as the materials are low in cost and produce high volume.
According to our study of various markets, these are the top three products with the highest markups:
Text Messages
(up to 6,000%): Without an unlimited plan, texts cost significantly more to send for the consumer than it costs for the company to transmit that data.
Bottled Water
(up to 4,000% depending on the brand): Is bottled water overpriced? Absolutely. And not only is bottled water thousands of times more expensive than tap water, but more than half of bottled water comes from the tap. For the vast majority of Americans, tap water is virtually identical in quality and safety to bottled water. If you are concerned or curious about the condition of your tap water, you can check your ZIP code in the Environmental Working Group's Tap Water Database.
Brand-Name Prescription Drugs
(200-3,000%): Why are prescription drugs so expensive? Major factors include a lack of price regulation, price hikes in the supply chain, limited market competition, and monopoly pricing on essential drugs for conditions like rheumatic diseases, cancer, HIV, and diabetes. Over one recent ten-year span, the cost of an EpiPen increased around 500%, from $100 to more than $600. Insulin prices have also tripled. Consumers often pay significantly more for brand-name prescription drugs than these drugs cost to make. While generic drugs can offer relief to consumers, new drugs are patent-protected from competition for 20 years.