Originally Posted by Hetfieldjames
Makes you wonder what these TV's from all manufacturers actually cost to build?
While there are many exceptions to the rule and quite a bit of variation, many products follow the doubling rule.**
For example, say a store is selling a tv for $2000. They bought it from the wholesaler for $1000, who bought it directly from the manufacturer for $500. The manufacturer needs to also cover their R&D expenses, so the tv probably cost $250 to make including R&D. Keep in mind that many of the parts they buy to make a tv cost pennies or a few dollars per item when they buy them in bulk (in the millions).
Why is the store's cut the highest? Because they take the highest risk. Shoplifting, returns, failure to sell and eating stock, etc. Also, a store may sell 100 of the tvs over a year, but the manufacturer would have sold millions.
This is how stores can make huge sales discounts on Black Friday, etc, and when sales become stagnant. Selling a $2000 tv for $1300 when they paid $1000 for it still nets them $300 per unit.
**With some tech, like Apple, the margins are extremely low because Apple takes the largest slice of the pie. In cases like these, the doubling rule doesn't apply. Same with cars.