Final answer:
Department and fashion specialty stores use markup percent to ensure coverage of costs and profit. Markup is influenced by factors like cost structure and competitive pricing, as demonstrated by the Huff Model and retail giants like Amazon.
Step-by-step explanation:
Most department and fashion specialty stores calculate markup percent based on the cost to acquire a product and the selling price they set for it. The markup is designed to cover all the businesses' costs and provide a profit margin. For instance, if a costume designer makes purchases for a show, including items like fabrics, shoes, and accessories, the selling price of the costumes will have to be marked up sufficiently to cover those costs and also allow for profit.
Likewise, the Huff Model can help to determine the potential success of a retail location by assessing elements such as size, desirability of goods, and competition, which all factor into how a store prices its goods and calculates markup. Meanwhile, a giant retailer like Amazon uses its efficient production model and low cost structure to keep prices, and consequently markups, lower than competitors.