Do Companies Incur Any Costs When Offering Employee Discounts at Stores Like Walmart and Target? If So, What Is the Approximate Cost Per Discount?

Businesses often consider offering employee discounts as a way to incentivize loyalty, boost morale, and retain talent. However, the question remains: do companies incur any costs when providing these discounts? And if so, what is the approximate cost per discount?

The Nature of Employee Discounts

It is important to understand that sales discounts, including employee discounts, are typically not considered an operating cost of a business. These discounts involve reducing the amount of proceeds the business receives from a sale. They function similarly to a regular sale, where the company gets less than the full retail price of the goods.

Do Companies Incur Costs for Employee Discounts?

When a business provides an employee discount, it is not paying anything to do so. The discount merely reduces the amount the business makes on a sale, similar to a traditional sale where the business receives less than the full retail price. Therefore, the cost to offer an employee discount is effectively zero.

Calculating the Cost Per Discount

The exact cost of an employee discount cannot be estimated without a detailed analysis of the company’s transaction data. Each individual discount given to an employee is based on the specific item and price at the time of the sale. This data is often not public, making it challenging to provide a general cost per discount.

A Real-World Example

Consider a situation where I, a former employee, needed to purchase a new washer and dryer. My wife and daughter met me at the store, not one I worked at, to pick out the appliances. They were offered a set with a few scratches for a lower price, and we agreed to take them. These appliances, delivered while I was working, were perfect and slightly more expensive than the discounted ones.

This anecdote underscores the point that employee discounts are not based on a specific company or store but rather the overall chain or sales practices. A discount for a Toyota employee might involve a car with scratches, while a Burger King employee’s discount might apply to their lunch menu. The exact nature of the discount can vary widely and does not necessarily correlate with the selling price at the company the employee works for.

Strategic Considerations

While employee discounts do not directly increase operating costs, they can have strategic implications for businesses. Offering these discounts can:

Boost employee morale and satisfaction

Facilitate talent retention

Improve customer relations through referrals and recommendations

Boost sales through word-of-mouth promotion

Companies must weigh these benefits against the potential impact on their bottom line. In some cases, the positive outcomes may outweigh the cost of the discounts, making them a worthwhile investment.

Conclusion

In summary, companies do not incur any costs when offering employee discounts to stores like Walmart and Target. The discount merely affects the amount the business receives from a sale, similar to any other sale. The actual cost per discount cannot be accurately estimated without specific transaction data and varies based on the item and time of the sale.

Additional Reading and Resources

For further insight into corporate strategies and cost analysis, explore the following resources:

Why Do Companies Offer Employee Discounts? - MarketWatch

How Do Employee Discount Programs Work? - Forbes

Are Employee Discounts a Waste of Money? - HR Zone