In an article by WellHeeled, an investigation into the markups and discounts of clothing are explored. The initial question is how is it possible for a company to make a profit if they are selling below the MSRP (manufacturer suggested retail price). What they discovered is that the price gets marked up several times by the time it gets to the retailer from the manufacturer. That means that an item sold at a store may only cost them an eighth of the MSRP price to make. That is why a product that that starts out at an expensive designer, such as Ralph Lauren, at high price can eventually be found later at a discount store or wholesaler for half the price and that store is still capable of making a profit. It is interesting to note that the article does not answer it's own question and only gives a vague hypothesis.
Do you believe that the initial price of clothing is established with the belief that the clothing will not be sold at that price so that the store may offer discounts to make the customer believe they are getting a better value? Do you believe, as a customer, that you would be getting as good a value or as good a quality product if they started at the lowest discount price?
http://www.wellheeledblog.com/2009/08/22/profit-margins-in-fashion-industry-banana-republic/
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