If merchants only get a small amount from what they sell, then how do they make profit if one or more of their product isn’t sold ?

Question

Let’s take a phone merchand for example. Let’s say that he sells the phones for 500$, but his income from a phone is 50$ because they are sold 450$ from the factory. So, if just ONE phone isn’t sold, he’d lose 450$, and he’d need to sell 9 phones (450÷5) just to come back to the starting point.

This question also works for any kind of merchandizing, including food (which becomes unsellable after a few days unlike phones).

So how do they make profit of it ? I’m confused

This post is the same as a post I made 1 hour ago that corrects some words, sorry for my bad english.

In: Economics

Answer 1

You’re math is correct but on average markups are much much higher than 10% in most cases. I work in the furniture industry and it’s mind blowing the markup most retailers put on pieces.

For example, most retailers I’ve seen are marking up large pieces of furniture 400-600% this is before accounting for shipping, which is very very expensive. However, at the end of the day most of these stores are at least tripling their money but usually more.