The Phoney Discount

Do you really think that a merchandiser can sell an item at a 60% discount and still make a profit?  Or 70%?  Or 80%?  No, not likely.  If they can sell an item at a huge discount at some times and still make a profit, then they must have been gouging when they were selling at the regular price.

What I think a merchandiser does is write down the price that he or she really wants and inflate it in such a way that the discount can be applied.  Let’s look at some examples.

Suppose, you see a wallet you’d like to buy and it’s being offered by Jim Smith at a whopping 80% discount.  Wow, what a bargain!  You really don’t want the item but can’t resist the bargain.  Mr. Smith tells you that the price is $60.00 but that when the discount is applied, the price will be  $12.00.  You buy the wallet and you’re happy because of the bargain.  The seller is happy too because $12.00 is its regular price and that’s all he wanted in the first place.

Here’s what Mr. Smith did to intrigue and fool you.  He subtracted the discount, expressed as a decimal, from 1.00.  Then, he divided the price he really wanted by the result.  In this example, he subtracted 0.80 from 1.00.  The result was 0.20.  Then, he divided $12.00 by 0.20.  The result was $60.00.  When you bought the item, the discount was $48.00 and the final price was $12.00

You walk out the store and see the same item in the show window of Janet Smith.  Ms. Smith is giving a 90% discount on a price of $120.00.  You kick yourself for having made a bad bargain.  If you had bought the wallet from Ms. Smith, you would have gotten a monumental $108.00 discount and paid only $12.00.  You barely notice that you would have paid the same either way.  Later, you find out that the two sellers are man and wife running side-by-side wallet stores.

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