I was at Starbucks yesterday, waiting for my Americano and browsing the merchandise wall.

The prices stunned me. Not because they were high (though they were), or because I’m a cheapskate (I sorta can be) but because I understand their cost structure. Their buying power. Their direct-to-consumer model.

Those margins are astro-freaking-nomical.

A basic plastic tumbler that probably costs them a dollar or less? $24.95. That fancy stainless steel one? $42.95.

The limited edition cups people line up for? Yikes.

But here’s the thing: Big margins aren’t greed.

They’re survival.

Starbucks can negotiate container costs down to pennies, ship by the millions, and sell through their OWN 40,199 stores.

You can’t.

As a small product maker, you face disproportionately higher:

• production costs
• Distribution markups
• Marketing expenses per dollar of profit
• Returns and warranty costs
• Inventory carrying costs
• customer service overhead

You NEED those fat margins because almost everything costs you more than it costs the big guys.

I call these “unfair disadvantages” — and they’re part of why so many products fail despite solving real problems.

The math just doesn’t work. Totally unfair, but it’s reality.

Action for today: Think about how you can command premium pricing. Because you don’t have a monster brand like Starbucks, the product has to make up the difference by delivering massive VALUE. Define how you can deliver, and prove that value, in an easily sharable way.

Need help building sustainable margins into your product strategy? Head over to Graphos Product or tap reply.

Laurier

Product Payoff: When Hydro Flask launched its water bottles at premium prices, critics said they were bonkers. NOBODY would pay that much for a water bottle! Today they dominate the category because those margins funded expansion while competitors struggled to scale with too little padding.