This was a comment in response to a BusinessWeek blog post about Circuit City’s 10% liquidation sale, and how no one is jumping on the sale. The problem was with her statement: you’re “only getting” 4% off.
Well, you’re not “only getting” 4% off. I’m not going to call her stupid like she called others, because I don’t think it’s nice to call other people stupid. However, she didn’t think things through. I’m sure most of you know this, but for those that don’t, it’s totally understandable, so here’s the math.
With a sale, the sale price is pre-tax, so if the sale is 10% off, you’ll save 10% off the original price, then pay taxes on that price. Our friend here seems to think that the 10% savings is after tax, but that’s wrong.
Math time:
Let’s say you have an item listed at $199.99 and your local taxes are 6%. You go to the register, it rings up as $199.99, then 6% is added to that price. The final purchase price of the item will be $211.99.
Now, let’s say that item is now 10% off. When you go to the register, that item will ring in as 10% off the original price, bringing it down to $179.99. Then, from there, the 6% taxes will be applied, bringing the item to $190.79.
So, $211.99 total for the original price, and $190.79 total for the sale price. Now, if you were only saving 4% off of $199.99 (like our friend thinks), the final sale price using her logic would be $203.51. Now, it seems like our $190.79 sale price is greater than a 4% reduction, doesn’t it? More like, say, 10%? Yup.
Another way to confirm this is take 10% off of the final purchase price of $211.99. As expected, we yet again get $190.79.
Now, to answer the question as to why people aren’t jumping on the 10% off sale: there are more than enough people out there who have written about that, so I won’t repeat them, because that’s a totally different topic altogether.
Well, that’s all for now.

