Friday, April 12, 2013

Profits & Markups in the Fashion Industry (or, Did Banana Republic Make Money Off My $20 Dress?

Banana Republic is a store with usually higher quality brands. If they sell a dress for only 20 dollars, according to the math done in this article, the dress would only cost the company about 5 dollars to make. Now, I doubt that Gap Inc was making these dresses and selling them for the correct price. This still isn't bad for the company even if they made little profit off of each dress, say 5 dollars instead of 15. They were getting rid of excess inventory quick with cheaper dresses, and this will draw in customers to show that Banana Republic isn't just a store with high quality, high priced items. They actually have an item or two that is a "good deal". Even with the deal the customers are now in the store and are more willing to buy the products since they are already buying one of the products. Do you think it is a good marketing strategy to sell a product for almost no profit value to draw in customers to your store?

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