Selling shoes that you purchase wholesale for $75 has costs that go beyond selling shoes that you purchase wholesale for $50. There's the cost of money to buy t

Selling shoes that you purchase wholesale for $75 has costs that go beyond selling shoes that you purchase wholesale for $50. There's the cost of money to buy the inventory, the cost of holding the inventory (and insuring it), the cost of shrinkage, the risk of being unable to sell some of that inventory. Most of those costs scale with the wholesale cost of the product being sold, although not necessarily fully linearly. As a result, a top line $50 margin on a $75 product gains you less than a $50 margin on a $50 product -- in a world with cheap capital. If you're restricted to holding $N of inventory due to cost of capital, this becomes even worse -- not only are your bottom line margins going down as much as 15%, but you're able to do it on only two thirds as much inventory, which (depending on turnover rates, etc) can drive you even lower.