He may have lost out on profit but unless he's an idiot (and we know he is not) he didn't lose actual out of pocket money. 1. mark-up on furniture lessens the hit 2. hedged bet guarantees a break even 3. lost profit =a percentage of marketing budget effectively spent
Whats the return policy at Gallery? Couldn't some smart asses have bought say...an expensive mattress hoping Seahawks win so they don't have to pay for it. But Monday morning if they had to pay for it, just return it?
Mattress Mack = Marketing Guru. Furniture markups = INSANE Traffic driven into the store for promotion = INSANE Mack didn't lose any money out of this I am sure, and even if he did, it's a short term loss which will lead to a long term gain, especially since he's making good on his word. How many people do you think bought from him and didnt even bother taking the bet? All those mark ups cover his "bet"
nobody. there was no bet. A customer buys the furniture and if Seattle won then it was free. That's not a bet as the customer is not gambling. No different then a 'free slushies at Sonic if your team wins' scenario. This is why it is legal.
Hadn't heard about it. I think that's a pretty damn smart promotion. If he spends 10% of revenue on marketing (I have no idea, but that's some rule of thumb I've heard), that's an annual budget of $20m. The payout is $7m, but the odds were slightly in his favor going into the game, so call it a $3m spend for free PR associated with the Superbowl (if he averages the cost for doing this over many Superbowls, he'll win some and lose some and average out the costs). Given the going rate of a Superbowl commercial, it looks like a pretty good value.
I bet it drew a bunch of extra customers in this weekend and not everybody necessarily spent the $6000 for the bet.
This isn't true because, as other people mentioned, he can hedge it. So he apparently sold $7MM worth of this furniture. Let's say that furniture cost him $2MM. The moneyline odds on Seattle were 1.2 to 1 or so - so you bet $2MM on Seattle. If Seattle wins, you refund the $7MM, but win $2.4MM on your bet. The furniture cost you $2MM, so you net profit $400k. If Denver wins, you keep the $7MM, lose the $2MM bet, and pay $2MM for the furniture. You net profit $3MM. It's pretty easy to structure this so there's zero chance of losing any money. And that's not even including all the publicity and new customers you've generated for the future.
:grin: Yessir, good FREE advertisement... ESPN is on it. Store loses $7M with Seahawks' win Updated: February 3, 2014, 12:45 PM ET By Darren Rovell | ESPN.com
not a bet. A bet implies you lose something if you lose. The customer only gains if conditions are met, he/she doesn't lose anything if they aren't met. Again this is why it is legal. Also why would the promotion draw in customers who don't plan on taking advantage of the promotion? They want to go when the store is most crowded for what reason?
Because they heard vaguely about the promotion but didn't realize there was a $6k minimum, so they went in and bought a couch. And now they're pissed because they were celebrating and telling their buddies during the game how they were going to get 800 bucks off this Seattle win. And one of the buddies was saying he thought you had to pay at least 6 grand, and they're saying no, the store didn't say nothing about that. And now they're getting text messages from their friend with links to articles about how you had to spend at least $6k to be eligible. And they're pissed about looking stupid. And, it is a sort of bet for the customer who may have picked GF over some other retailer or bought more than he originally intended, or sooner than he intended, or flat-out decided to spend $6k on furniture when he otherwise would not have bought anything. Surely, there were some people who were about the spend a bunch of money there and then anyway, and this promotion was simply fortuitous, but I'm sure some participants changed their behavior (and thereby took on some hidden costs) so that they can take this bet.
1. Mark-up is irrelevant, because what we're talking about is opportunity cost. He *had* their money, now he has to give it back. There's only a finite amount of paying customers in a year (200MM worth) and he lost 4% of his total annual revenue in a single moment. 2. He hasn't said anything about hedging, and he's done this promotion several times before (without losing his shirt) and made no mention of it. Not unheard of for an eccentric older rich guy to take large risks. 3. As I said, there's no way in hell his marketing budget is anywhere close to 7MM per year. And this publicity, though nice, is not worth 7MM. Also, I doubt the run-up to this promotion brought him any new business, nor was it advertised much. Unlike similar promotions he has done in the past. I'm sure he has accountants and they'll do what they can to minimize the bleeding, but a goof is still a goof. If he got miffed over a 600K loss, 7 million has to stick in his craw.
Some guy spends $800 without checking to make sure the promotion is what he thinks it is? He doesn't ask the salesperson? He doesn't ask how he gets his money back if the Seahawks win? Or he doesn't ask when he will be charged?Seems pretty improbable.
I like Mac. He brought major tennis back to Houston and tried his best to make it flourish. Ultimately it didn't, but I appreciated the effort.
He might have a "net" profit of $400,000 in your example, but he lost an existing $5,000,000 "net" profit.
Do you really think a business man that's been in business for decades would simply lose money on some type of promotion as this? There is no way he loss money on this. Furniture markup is at least 500% - 1000%. I am pretty certain he bought premium insurance in case Seattle wins to over cover more than what he would have loss in his true cost. Even if he made $100k and that's putting it lightly (probably a lot more), $100k during a sales promotion in which he probably wouldn't have made near that money. That is coming out big. There's no way he would have sold $7million without that promotion so others who said he loss out on the net profit is overlooking that. Anywho he made money, got free advertising and having everybody freaking out and saying how Mack is such a great guy.
Sure - but you're assuming he would have sold that $7MM in furniture without the promotion. Generally if a business can generate publicity without actually costing themselves any money, it's not a "goof". He had basically a 50% chance of making a lot of money, and a 50% chance of making a little money, with a 100% chance of bringing in lots of traffic and getting exposure.
And now with espn picking up the story, he is going to set records next Super Bowl if he makes the bet again.
I have to agree. He made a lot of money off of customers. I like that he claimed in interviews that this was actually good for his customers. Solid investment for those who won, although the furniture is utter garbage and should be replaced within a few years. Anyone who bought $6,000 worth of furniture in hopes of winning it is probably not very concerned with aesthetics.
