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(My Fox Houston)   Not News: Furniture store holds promotion that if you spend more than $6,000 you get your money back if Seattle wins the Super Bowl. Fark: Store refunds over $7 Million back to customers   (myfoxhouston.com) divider line 127
    More: Fail, Super Bowl, Seattle, refunds, furniture  
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12431 clicks; posted to Main » on 03 Feb 2014 at 10:19 AM (32 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



127 Comments   (+0 »)
   
View Voting Results: Smartest and Funniest
 
2014-02-03 07:15:59 AM
Not sure what the Fail is supposed to be here. It's a fairly commonplace promotion, and I'd bet your mortgage that the store had insurance against Seattle winning.
 
2014-02-03 07:20:48 AM
Happens out here every year if the Red Sox win (I think they start iy before the season starts). One year they paid out, and yeah it was insured.
 
2014-02-03 09:38:26 AM

czetie: Not sure what the Fail is supposed to be here. It's a fairly commonplace promotion, and I'd bet your mortgage that the store had insurance against Seattle winning.


He said he didn't purchase insurance when he lost $600,000 at the divisional game

Most stores purchase insurance to prevent losing money during wild promotional events, which could have limited the financial damage. McIngvale told Yahoo Sports he did not purchase insurance.

Hope he did for this one. Otherwise that's gonna hurt.
 
2014-02-03 09:42:21 AM
I'd have taken the money and bet on the game myself then bought better furniture if it worked out.
 
2014-02-03 09:44:54 AM
He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack
 
2014-02-03 09:49:19 AM
"Mattress Mac doesn't believe in insurance. He considers it a form of gambling."
 
2014-02-03 09:57:52 AM
The man is a marketing genius.
 
2014-02-03 10:18:05 AM

scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack


what a dumbass.
 
2014-02-03 10:23:46 AM

scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack


What a damn idiot, that is fail...
 
2014-02-03 10:24:34 AM
I just did a GIS for "Krusty the Clown Olympics" and an image of Liz Taylor came up.  I'm very confused.  Or maybe not.
 
2014-02-03 10:25:11 AM

SilentStrider: scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack

what a dumbass.


Why is that being a dumbass?  In the short term, insurance might be smart but just like gambling, insurance is always a long term losing venture.  If the odds were 50/50 this year, to insure $7 million of furniture, an insurance company would have charged him something like $4 million.  Turns out this year that would have been smart.  But do this year after year after year after year and as long as you can weather the bad years, it's no longer smart.
 
2014-02-03 10:27:24 AM

Tr0mBoNe: I'd have taken the money and bet on the game myself then bought better furniture if it worked out.


The catch here isn't 'get free furniture' it's an incentive to overspend and maybe get free furniture.

In your example, if you lose you get nothing. It's lose-win; with the furniture you by whatever you normally would have and at worst you have to pay whatever you were going to anyway.
 
2014-02-03 10:28:04 AM

czetie: Not sure what the Fail is supposed to be here. It's a fairly commonplace promotion, and I'd bet your mortgage that the store had insurance against Seattle winning.


Yeah, not sure about the "Fail", either. Even if the guy DIDN'T get insurance, he just got a ton of free advertising based on his "goodwill" and "sportsmanship". Besides, it sounds like the place has been around forever, he's not going out of business. Yeah, 7 mil is a lot of money, but something this big pays off for years and years, and ends up getting you over 1,000 return customers who will tell everyone they can think of.
 
2014-02-03 10:29:32 AM

lennavan: SilentStrider: scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack

what a dumbass.

Why is that being a dumbass?  In the short term, insurance might be smart but just like gambling, insurance is always a long term losing venture.  If the odds were 50/50 this year, to insure $7 million of furniture, an insurance company would have charged him something like $4 million.  Turns out this year that would have been smart.  But do this year after year after year after year and as long as you can weather the bad years, it's no longer smart.


And look at all this free advertising he received. That makes up the difference, and then some.
 
2014-02-03 10:29:44 AM

Satanic_Hamster: scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack

What a damn idiot, that is fail...


What would it cost to insure what is essentially a 50/50 bet? (maybe 45/50). I assume less than the full amount but far more than the typical weather-related promotions.
 
2014-02-03 10:29:52 AM

lennavan: SilentStrider: scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack

what a dumbass.

Why is that being a dumbass?  In the short term, insurance might be smart but just like gambling, insurance is always a long term losing venture.  If the odds were 50/50 this year, to insure $7 million of furniture, an insurance company would have charged him something like $4 million.  Turns out this year that would have been smart.  But do this year after year after year after year and as long as you can weather the bad years, it's no longer smart.


True, but if a guy selling mattresses can afford a few "bad years" of $7 million losses, I think his mattresses might be overpriced to begin with. Or he's selling 10,000 of them a day.
 
2014-02-03 10:30:19 AM

Mikey1969: czetie: Not sure what the Fail is supposed to be here. It's a fairly commonplace promotion, and I'd bet your mortgage that the store had insurance against Seattle winning.

Yeah, not sure about the "Fail", either. Even if the guy DIDN'T get insurance, he just got a ton of free advertising based on his "goodwill" and "sportsmanship". Besides, it sounds like the place has been around forever, he's not going out of business. Yeah, 7 mil is a lot of money, but something this big pays off for years and years, and ends up getting you over 1,000 return customers who will tell everyone they can think of.


Personally I think his dumbest move was saying it's automatically free if Seahawks win. Should've had the customers pick who wins. A hell of a lot of people would've picked the Broncos.
 
2014-02-03 10:30:35 AM
At least he isn't welching on his bet.
 
2014-02-03 10:31:21 AM

AliceBToklasLives: Satanic_Hamster: scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack

What a damn idiot, that is fail...

What would it cost to insure what is essentially a 50/50 bet? (maybe 45/50). I assume less than the full amount but far more than the typical weather-related promotions.


Never mind - reading comprehnsion etc
 
2014-02-03 10:33:35 AM
Sofa KIng smart.
 
2014-02-03 10:34:35 AM
If the store is paying out according to the terms of the bet, I don't see why this is news.
 
2014-02-03 10:35:46 AM
He should have taken the $7 million and placed a bet in Vegas on the Seahawks.
 
2014-02-03 10:36:02 AM

AliceBToklasLives: What would it cost to insure what is essentially a 50/50 bet? (maybe 45/50). I assume less than the full amount but far more than the typical weather-related promotions.


and if the moron had bought insurance, he could actually make more of a profit. instead, he's in the hole
 
2014-02-03 10:37:11 AM
lets be clear here.

The furniture cost him 1/2 that at most. He gets to write off 7 million to marketing....  which will help eliminate a good portion of taxes.  so maybe end of the day he "lost"  1 million. I doubt even that much.
 
2014-02-03 10:37:17 AM
I am sure he is still profitable for the year and, if not, he gets a juicy NOL for tax purposes.
 
2014-02-03 10:38:48 AM

ChrisDe: lennavan: SilentStrider: scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack

what a dumbass.

Why is that being a dumbass?  In the short term, insurance might be smart but just like gambling, insurance is always a long term losing venture.  If the odds were 50/50 this year, to insure $7 million of furniture, an insurance company would have charged him something like $4 million.  Turns out this year that would have been smart.  But do this year after year after year after year and as long as you can weather the bad years, it's no longer smart.

True, but if a guy selling mattresses can afford a few "bad years" of $7 million losses, I think his mattresses might be overpriced to begin with. Or he's selling 10,000 of them a day.



It's the latter. Well maybe not 10,000 a day but he sells a shiat load of furniture. The guy is pretty wealthy.
 
2014-02-03 10:39:28 AM

ChrisDe: lennavan: SilentStrider: scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack

what a dumbass.

Why is that being a dumbass?  In the short term, insurance might be smart but just like gambling, insurance is always a long term losing venture.  If the odds were 50/50 this year, to insure $7 million of furniture, an insurance company would have charged him something like $4 million.  Turns out this year that would have been smart.  But do this year after year after year after year and as long as you can weather the bad years, it's no longer smart.

True, but if a guy selling mattresses can afford a few "bad years" of $7 million losses, I think his mattresses might be overpriced to begin with. Or he's selling 10,000 of them a day.


Well, first, he sells furniture including mattresses, his nickname is Matress Mac, presumably because Furniture Mac isn't as catchy.  If you only count orders $6000 or higher, this store sold nearly $7 million of furniture in two weeks.  Also, he is not absorbing $7 million of losses, that's what his stuff SOLD for.  I would be we're only really looking at $2-3 million in losses.

And if you watch the news segment on it, it's a 2 minute Matress Mac commercial about how customers are getting an even better deal than usual.  So he paid something like $2-3 million for an ad campaign.  He's not just betting on this one Super Bowl, he's building and maintaining a brand.  I'd bet he does this same ad campaign every year.
 
2014-02-03 10:39:38 AM
So the tag is Fail because he didn't ask for a bailout or something?  I don't get it.
 
2014-02-03 10:39:51 AM

czetie: Not sure what the Fail is supposed to be here. It's a fairly commonplace promotion, and I'd bet your mortgage that the store had insurance against Seattle winning.


If they didn't, they're idiots of the highest magnitude. This isn't like some store in San Diego betting against 12 inches of snow on New Years Day or something.
 
2014-02-03 10:39:58 AM

SilentStrider: AliceBToklasLives: What would it cost to insure what is essentially a 50/50 bet? (maybe 45/50). I assume less than the full amount but far more than the typical weather-related promotions.

and if the moron had bought insurance, he could actually make more of a profit. instead, he's in the hole


Not if you run it year after year. They've been around a long time and are a Houston fixture. You don't think they ran all the numbers?
 
2014-02-03 10:40:55 AM
He's got more money than god, anyway. Seriously, it would hurt me more to lose $700, than it hurts Mattress Mac to lose 7 mill.
 
2014-02-03 10:43:59 AM
His slogan for the past 30+ years, known by all Houstonians, is "Saves...You...MONEY!!"
 
2014-02-03 10:44:45 AM
I'm sure he and his corporate accounting wizards figured out the odds, and that the amount they sold over $6k actually made them profits even with giving it back.
 
2014-02-03 10:45:43 AM

sigdiamond2000: "Mattress Mac doesn't believe in insurance. He considers it a form of gambling."


Then what the hell does he consider betting $7M that Seattle will lose the Super Bowl?
 
2014-02-03 10:46:48 AM
lennavan:
And if you watch the news segment on it, it's a 2 minute Matress Mac commercial about how customers are getting an even better deal than usual.  So he paid something like $2-3 million for an ad campaign.  He's not just betting on this one Super Bowl, he's building and maintaining a brand.  I'd bet he does this same ad campaign every year.

Bingo. He's getting all the same post-game coverage that the game day commercials do, and he saved at least a million bucks on it.
 
2014-02-03 10:48:24 AM
Jordan's Furniture did the same thing with the Red Sox and their World Series wins.

Just buy insurance and sell ads.
 
2014-02-03 10:50:32 AM
My poor namesake has been losing quite a bit recently on these bets. Then again, he makes money hand over fist.

$7m for prime-time, nationwide media exposure that I'm sure he's writing at least part off in off in taxes? Something tells me he may know what he's doing. Plus his stuff is way overpriced to begin with. His whole angle is pay today get it today and it seems to work as he's always expanding.

My wife just bought some nightstands from Star and they're taking over a month to come in.

BinderWoman: His slogan for the past 30+ years, known by all Houstonians, is "Saves...You...MONEY!!"


"No frustrating back-back-back order slips"

And his daughter is pretty hot.
 
2014-02-03 10:51:51 AM

Weidbrewer: sigdiamond2000: "Mattress Mac doesn't believe in insurance. He considers it a form of gambling."

Then what the hell does he consider betting $7M that Seattle will lose the Super Bowl?


Advertising.
 
2014-02-03 10:56:02 AM

scottydoesntknow: Hope he did for this one. Otherwise that's gonna hurt he deserves to be out of business.


FTFY.
 
2014-02-03 10:57:19 AM
They did this once they were already in the Super Bowl?

They must be WAY overpriced for that to make sense.
 
2014-02-03 10:58:08 AM

scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack


Seriously? Wow.

I take it back. Fail, but only because we don't have a "farking moron" tag.
 
2014-02-03 10:59:32 AM
He didn't really loose 7M, that's how much he refunded.  At worst, he lost the wholesale costs and salesmen commissions. There are probably other costs, but they are certainly balanced out by the free publicity.
 
2014-02-03 11:03:00 AM

MadMattressMack: Advertising


It's still potato, patahtoe.

He pays for the "advertising" in when his team loses, and doesn't when they win.  So, he's still betting whether he's going to get a lot of big ticket sales, or spend a lot of money for a Super Bowl ad.

Whatever helps Churchy MacBetterThanYou sleep through the night, I guess.
 
2014-02-03 11:05:27 AM
The are folks who make, lose, and remake fortunes periodically.

If you want to be wealthy you are likely going to have to take risks.
 
2014-02-03 11:05:46 AM
s3.sidereel.com
 
2014-02-03 11:07:31 AM
Considering that he was willing to invest $8 million in the Chuck Norris movie "Sidekicks" back in the early '90s and attempted to invest $100 million for the naming rights of former Enron Field, now Minute Maid Park in the early '00s, I doubt the $7 million loss today hurt nearly as much in comparison.
 
2014-02-03 11:09:20 AM
Mattress Mac's maniacal marketing magically makes Mac money, my mom mentioned.

/In the long term.
 
2014-02-03 11:10:09 AM

Diogenes: I just did a GIS for "Krusty the Clown Olympics" and an image of Liz Taylor came up.  I'm very confused.  Or maybe not.


images4.wikia.nocookie.net
 
2014-02-03 11:19:30 AM
Isn't it illegal to sell used matresses, even if they were only used for a few days (during the promo)?  If so, there's the fail.  Not sure about the other furniture - never been to this place, so don't know if they just sell 'new' or if they do new and used.  If just 'new', then I think it would be a poor business practicce for them to welcome back all this returned furniture, scotchgard it, and tag it as 'new' to try to put the original price tag back on it.

Lotta fail, if that's the case.
 
2014-02-03 11:22:01 AM

Premeditated_Road_Rage: Isn't it illegal to sell used matresses, even if they were only used for a few days (during the promo)?  If so, there's the fail.  Not sure about the other furniture - never been to this place, so don't know if they just sell 'new' or if they do new and used.  If just 'new', then I think it would be a poor business practicce for them to welcome back all this returned furniture, scotchgard it, and tag it as 'new' to try to put the original price tag back on it.

Lotta fail, if that's the case.


I have no idea what you are talking about.
 
2014-02-03 11:24:10 AM

Weidbrewer: MadMattressMack: Advertising

It's still potato, patahtoe.

He pays for the "advertising" in when his team loses, and doesn't when they win.  So, he's still betting whether he's going to get a lot of big ticket sales, or spend a lot of money for a Super Bowl ad.

Whatever helps Churchy MacBetterThanYou sleep through the night, I guess.


And I'm sure it's still a tax write off if he loses. Next year he'll do it again and people will probably spend even more. I'm not arguing he's not gambling, just that he doesn't view it that way.
 
2014-02-03 11:24:52 AM
lennavan: If you only count orders $6000 or higher, this store sold nearly $7 million of furniture in two weeks.  Also, he is not absorbing $7 million of losses, that's what his stuff SOLD for.  I would be we're only really looking at $2-3 million in losses.

Yup. Sounds like his stores sell somewhere in excess of $200 million of furniture a year, so this cost him maybe 1% of his overall annual sales. I think he'll be OK.
 
2014-02-03 11:25:15 AM
If his customers paid full price for the furniture, he'll make his money back the next year.
 
2014-02-03 11:25:25 AM
Maybe you can break even on a stunt like this if you bet on the team?

Team wins, you use the pay-out to reimburse your customers.

Team loses, the money you put in the bet is still compensated by the extra revenue you generated.

Either way, you can write it off on the publicity budget and actually delivering on a promise has to be worth something for your corporate image.
 
2014-02-03 11:31:09 AM

scottydoesntknow: Premeditated_Road_Rage: Isn't it illegal to sell used matresses, even if they were only used for a few days (during the promo)?  If so, there's the fail.  Not sure about the other furniture - never been to this place, so don't know if they just sell 'new' or if they do new and used.  If just 'new', then I think it would be a poor business practicce for them to welcome back all this returned furniture, scotchgard it, and tag it as 'new' to try to put the original price tag back on it.

Lotta fail, if that's the case.

I have no idea what you are talking about.


When did anyone say he was selling used mattresses? The expectation of returns and loss are built into the price no matter where you go.  They don't offer cash back at all so they don't have to worry about losing the money.

https://www.galleryfurniture.com/customer-satisfaction/
 
2014-02-03 11:34:07 AM

SilentStrider: scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack

what a dumbass.


It seems a lot of people here need to take a marketing class or two.  And, it's plainly obvious this company can afford 7mil and probably spends double that on advertising every year.
 
2014-02-03 11:34:26 AM
From the local news this morning apparently the only thing that happened in Houston over the weekend was Mattress Mack's latest marketing plan.....
 
2014-02-03 11:34:29 AM

Target Builder: lennavan: If you only count orders $6000 or higher, this store sold nearly $7 million of furniture in two weeks.  Also, he is not absorbing $7 million of losses, that's what his stuff SOLD for.  I would be we're only really looking at $2-3 million in losses.

Yup. Sounds like his stores sell somewhere in excess of $200 million of furniture a year, so this cost him maybe 1% of his overall annual sales. I think he'll be OK.


When you think that a 30 second super bowl ad cost $3.3 million without the associated production costs this is generating far more attention for less money. I bet he only lost $1- $2 million and next year he'll do it again with even more people jumping on it.
 
2014-02-03 11:35:49 AM

SlashW: From the local news this morning apparently the only thing that happened in Houston over the weekend was Mattress Mack's latest marketing plan.....


The Texans sure weren't playing. Well, maybe Matt Schaub was in disguise.
 
2014-02-03 11:37:02 AM

MadMattressMack: scottydoesntknow: Premeditated_Road_Rage: Isn't it illegal to sell used matresses, even if they were only used for a few days (during the promo)?  If so, there's the fail.  Not sure about the other furniture - never been to this place, so don't know if they just sell 'new' or if they do new and used.  If just 'new', then I think it would be a poor business practicce for them to welcome back all this returned furniture, scotchgard it, and tag it as 'new' to try to put the original price tag back on it.

Lotta fail, if that's the case.

I have no idea what you are talking about.

When did anyone say he was selling used mattresses? The expectation of returns and loss are built into the price no matter where you go.  They don't offer cash back at all so they don't have to worry about losing the money.

https://www.galleryfurniture.com/customer-satisfaction/


Ha, your handle is extremely appropriate for this thread.
 
2014-02-03 11:38:07 AM
MadMattressMack:

Most contextually relevant FARK handle ever.
 
2014-02-03 11:40:31 AM

scottydoesntknow: MadMattressMack: scottydoesntknow: Premeditated_Road_Rage: Isn't it illegal to sell used matresses, even if they were only used for a few days (during the promo)?  If so, there's the fail.  Not sure about the other furniture - never been to this place, so don't know if they just sell 'new' or if they do new and used.  If just 'new', then I think it would be a poor business practicce for them to welcome back all this returned furniture, scotchgard it, and tag it as 'new' to try to put the original price tag back on it.

Lotta fail, if that's the case.

I have no idea what you are talking about.

When did anyone say he was selling used mattresses? The expectation of returns and loss are built into the price no matter where you go.  They don't offer cash back at all so they don't have to worry about losing the money.

https://www.galleryfurniture.com/customer-satisfaction/

Ha, your handle is extremely appropriate for this thread.


I went with the craziest and most annoying local advertising when I made it. haha
 
2014-02-03 11:40:49 AM
It's also $7mil that wasn't spent at a competitor's store
 
2014-02-03 11:43:22 AM

Watubi: It's also $7mil that wasn't spent at a competitor's store


Bam.  Brilliant.
 
2014-02-03 11:43:57 AM

Watubi: It's also $7mil that wasn't spent at a competitor's store


That's also $7mil of our money, not his. He didn't spend anywhere near $7mil on that furniture.
 
2014-02-03 11:44:30 AM

Watubi: SilentStrider:  what a dumbass.

It seems a lot of people here need to take a marketing class or two.  And, it's plainly obvious this company can afford 7mil and probably spends double that on advertising every year.


The advertising is just the icing on the cake.  Even if this never makes the news at all, this was the smart move.  People just aren't using their brains, or alternatively, have no idea how insurance works.

They think this guy was stupid for not getting insurance.  So then would it have been stupid for an insurance company to insure him?  No they would simply charge this guy an amount that would put the bet in their favor.  This guy DID get insurance, but he cut out the middleman -- the insurance company.  He self insured.  The only reason people don't self insure things like health or auto is because most can't afford the worst case scenario, so it protects against that.  This guy clearly can afford that.  He would have been stupid to pay someone else for insurance.
 
2014-02-03 11:45:43 AM

MadMattressMack: And his daughter is pretty hot.


Pics or it didn't happen.
 
2014-02-03 11:59:14 AM
thats what i lost on puppy bowl this year!
 
2014-02-03 12:00:12 PM
Assuming no insurance, this IS a big fail , and here's why:

Furniture isn't something you buy often.  It's not like gas and groceries.  During this promotion, a whole bunch of people (who had been putting off buying furniture for a while) decided to buy a bunch (knowing that they would eventually need it anyway).  They bought now only because of the probability of getting it free.  (If Seattel would have lost, many would have tried to return the furniture or quit making payments on it.... but maybe Mac had "insurance" such as pay-up-front, no financing, no returns)...

But Seattle won... the result is that even if the customers "like" the furniture, most of the customers will not buy furniture again for 10 years.  Also, if they're the type of people that only bought from him due to the promotion, they'll buy the furniture somewhere cheaper next time anyway.

He took a loss.  I highly doubt this promotion gained him any new customers.  It only gained people who will try to take advantage of his next fail promotion, which will once again be a huge loss for him.
 
2014-02-03 12:02:34 PM
If they mark up like the furniture stores around here then his total losses are probably closer to 1 million.
 
2014-02-03 12:04:12 PM

Eskaminagaga: Considering that he was willing to invest $8 million in the Chuck Norris movie "Sidekicks" back in the early '90s and attempted to invest $100 million for the naming rights of former Enron Field, now Minute Maid Park in the early '00s, I doubt the $7 million loss today hurt nearly as much in comparison.


That movie blew my mind when I was 11. If only I had known that a martial arts training montage could have cured my asthma!
 
2014-02-03 12:06:42 PM
You can buy insurance to cover a gambling bet?
 
2014-02-03 12:07:06 PM
$7 million at retail is probably several hundred dollars worth of cheap, stapled together furniture imported from Vietnam at wholesale.
 
2014-02-03 12:08:43 PM

TheDirtyNacho: lennavan: SilentStrider: scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack

what a dumbass.

Why is that being a dumbass?  In the short term, insurance might be smart but just like gambling, insurance is always a long term losing venture.  If the odds were 50/50 this year, to insure $7 million of furniture, an insurance company would have charged him something like $4 million.  Turns out this year that would have been smart.  But do this year after year after year after year and as long as you can weather the bad years, it's no longer smart.

And look at all this free advertising he received. That makes up the difference, and then some.


RTFA. $7 million is not "free".

I am shocked that this thread is filled with such financial ignorance.

/not really
 
2014-02-03 12:12:50 PM

brobdiggy: Assuming no insurance, this IS NOT a big fail , and here's why:


I fixed that statement for you.  For reasoning:

brobdiggy: During this promotion, a whole bunch of people (who had been putting off buying furniture for a while) decided to buy a bunch (knowing that they would eventually need it anyway). They bought now only because of the probability of getting it free.


Good point.

brobdiggy: It only gained people who will try to take advantage of his next fail promotion, which will once again be a huge loss for him.


You are completely right.  And because no one has any farking clue whether his next promotion will be a fail or not, it has just as much chance of being a huge gain for him and that's why promotions like these exist.  Cool!
 
2014-02-03 12:20:08 PM

umad: RTFA. $7 million is not "free".

I am shocked that this thread is filled with such financial ignorance.

/not really


Says the guy who thinks this cost the store $7 million?

The promotion and the bet cost Mattress Mac something like $2-3 million.  The advertising on the news was free.  Stores run this type of promotion all the time, without ever making the news.  And they keep doing it year after year after year, without ever making the news.  And they keep doing it without ever going out of business.  Now I fully understand you have no clue how that works but that's because you're stupid.

Fortunately Mattress Mac has more financial sense than you and that's why he's still in business and this story wasn't about how he is going bankrupt.
 
2014-02-03 12:22:53 PM

brobdiggy: Assuming no insurance, this IS a big fail , and here's why:

He took a loss.  I highly doubt this promotion gained him any new customers.  It only gained people who will try to take advantage of his next fail promotion, which will once again be a huge loss for him.


Well, consider that he took a loss of the cost of the furniture, not a loss on mark-up.  So if he sells you a $2000 chair for $3500, then we're talking oh $4 million instead of $7 million loss.  Now that $4 million gets written off taxes, returning about 40%--$1.6 million--so he took a $2.4 million loss.

Insurance would not greatly bound this risk.  Insurance counts as income--you get a 1099 tax form--so you're talking about the million-or-so premium plus $1.6 million in taxes in a pay-out.  You'd just about break even if the policy cost $800k in this scenario--that is, you'd pay $800k, recover your $4 million loss, pay $1.6 million in taxes on that, and wind up spending $2.4 million total.  Same loss.

So unless the insurance policy cost less than $800k, insurance is not helpful.  On the other hand, the maximum benefit is roughly $800k--if the insurance cost $400k, then they'd come out $400k ahead versus no insurance.  Mind you this math is wrong:  your insurance 1099 is differential, so a $4M payout on an $800k policy is $3.2M in income; while a $4M payout on a $400k policy is $3.6M in income.  Think on the implications of that:  a little less in taxes, but a cheaper policy only saves you 60%-ish of the discount (so a $400k policy saves you, when claimed, $240k over a claim on an $800k policy, rather than putting you $400k ahead).

Taxes.
 
2014-02-03 12:24:51 PM

TheDirtyNacho: lennavan: SilentStrider: scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack

what a dumbass.

Why is that being a dumbass?  In the short term, insurance might be smart but just like gambling, insurance is always a long term losing venture.  If the odds were 50/50 this year, to insure $7 million of furniture, an insurance company would have charged him something like $4 million.  Turns out this year that would have been smart.  But do this year after year after year after year and as long as you can weather the bad years, it's no longer smart.

And look at all this free advertising he received. That makes up the difference, and then some.

yeah, right. I'm gonna go buy furniture from this idiot, because he's an idiot. instead of going to rooms to go and get the same sh*t cheaper, delivered, 18 months same as cash.
/ CRAZY EDDIE! HE'S INSANE!

 
2014-02-03 12:25:25 PM

umad: TheDirtyNacho: lennavan: SilentStrider: scottydoesntknow: He responded to a guy on twitter and said he did not have insurance for this event either.

https://twitter.com/MattressMack

what a dumbass.

Why is that being a dumbass?  In the short term, insurance might be smart but just like gambling, insurance is always a long term losing venture.  If the odds were 50/50 this year, to insure $7 million of furniture, an insurance company would have charged him something like $4 million.  Turns out this year that would have been smart.  But do this year after year after year after year and as long as you can weather the bad years, it's no longer smart.

And look at all this free advertising he received. That makes up the difference, and then some.

RTFA. $7 million is not "free".

I am shocked that this thread is filled with such financial ignorance.

/not really



So he's paying for all these news stories, fark threads and countless discussions taking place around Houston?

Someone's ignorant here, but it's not me.
 
2014-02-03 12:26:42 PM

Fano: czetie: Not sure what the Fail is supposed to be here. It's a fairly commonplace promotion, and I'd bet your mortgage that the store had insurance against Seattle winning.

If they didn't, they're idiots of the highest magnitude. This isn't like some store in San Diego betting against 12 inches of snow on New Years Day or something.


Insurance isn't really needed on a near 50/50 proposition.   He could have gone out to Vegas and bet $3.5 million on the Seahawks, then if Denver won he'd be down $3.5 million and if Seahawks won, he'd be down ~$3 million (since STL was a slight underdog).

But when you place a bet you're paying the house 10% juice.   In the end it will cost him money to pay the juice or to buy insurance.   If you've got the money to lose it's a lot better to insure it yourself than to pay someone for insurance (or for juice).   That's why most large companies are

Had he been offering a $7 million prize for someone shooting a half court shot, then purchasing insurance might be a little more reasonable.   He could probably buy that policy for $100,000 and guarantee that he loses just $100,000 for a promotion for his store.
 
2014-02-03 12:28:05 PM

lennavan: umad: RTFA. $7 million is not "free".

I am shocked that this thread is filled with such financial ignorance.

/not really

Says the guy who thinks this cost the store $7 million?

The promotion and the bet cost Mattress Mac something like $2-3 million.  The advertising on the news was free.  Stores run this type of promotion all the time, without ever making the news.  And they keep doing it year after year after year, without ever making the news.  And they keep doing it without ever going out of business.  Now I fully understand you have no clue how that works but that's because you're stupid.

Fortunately Mattress Mac has more financial sense than you and that's why he's still in business and this story wasn't about how he is going bankrupt.



Someone mentioned how he tends to lose these 'bets' each year.  One might wonder if that is intentional considering how it generates a lot more interest than if he won.

But let's let the fark advertising wizards spell out his doom once again.
 
2014-02-03 12:30:32 PM

simkatu: Had he been offering a $7 million prize for someone shooting a half court shot, then purchasing insurance might be a little more reasonable. He could probably buy that policy for $100,000 and guarantee that he loses just $100,000 for a promotion for his store.


No it wouldn't for the exact same reason you outlined above.  Buying a policy for $100,000 means means the insurance company decided the chances of making that shot were 1/77.  You're still paying the juice.

The only reason you purchase insurance is if you can't cover the worst case scenario and it would bankrupt you.
 
2014-02-03 12:33:43 PM
... Immediately goes out of business.
 
2014-02-03 12:35:36 PM

TheDirtyNacho: Someone mentioned how he tends to lose these 'bets' each year. One might wonder if that is intentional considering how it generates a lot more interest than if he won.


I would bet much more likely, he does his very best to make it seem that way.  The bets he loses make the news and even if they don't, he runs ads touting the lost bets.
 
2014-02-03 12:47:11 PM

lennavan: TheDirtyNacho: Someone mentioned how he tends to lose these 'bets' each year. One might wonder if that is intentional considering how it generates a lot more interest than if he won.

I would bet much more likely, he does his very best to make it seem that way.  The bets he loses make the news and even if they don't, he runs ads touting the lost bets.



It's a variation on the "i must be insane to have these prices!" schtick.
 
2014-02-03 12:50:40 PM

SilentStrider: AliceBToklasLives: What would it cost to insure what is essentially a 50/50 bet? (maybe 45/50). I assume less than the full amount but far more than the typical weather-related promotions.

and if the moron had bought insurance, he could actually make more of a profit. instead, he's in the hole


Over the long term you will lose more by having insurance. Insurers work out the odds and set the premium to ensure they always make a profit. The premiums for a 50/50 event would be more than 50% of the total sum insured, so over say four years assuming he loses half the time the figures would look like this:

Without insurance.
Year 1 lose $7m
Year 2 win, no loss.
Year 3 lose $7m
Year 4 win, no loss.
Total expense for promotion $14 million

With insurance.
Year 1 lose $4million insurance premium.
Year 2 win,$4million insurance premium.
Year 3 lose $4million insurance premium.
Year 4 win, $4million insurance premium.
Total expense for promotion $16 million

By having insurance you are $2 million dollars worse off.

Insurance is great for rare events and/or when the bill could be huge. Insurance for a skiing holiday is well worth it because a single accident could cost six or even seven figures for a bad accident, transport home from a foreign country etc. A warranty on a new TV is a waste of time because they are generally reliable and the very worst case scenario is you'd have to buy a new TV.
 
2014-02-03 12:51:51 PM

lennavan: Well, first, he sells furniture including mattresses, his nickname is Matress Mac, presumably because Furniture Mac isn't as catchy.  If you only count orders $6000 or higher, this store sold nearly $7 million of furniture in two weeks.  Also, he is not absorbing $7 million of losses, that's what his stuff SOLD for.  I would be we're only really looking at $2-3 million in losses.


The mark up on furniture is huge. I'd say $7 million at retail probably cost him under a million.
 
2014-02-03 12:59:10 PM
There are insurance companies who will sell coverage to cover gambling losses?
 
2014-02-03 01:01:10 PM
Anyone who spent five minutes examining the schedule Denver played vs that of Seahawks, or watched any of either team's playoff games would have furnished their entire house for free.

/thanks, Vegas.
 
2014-02-03 01:06:02 PM

lennavan: as long as you can weather the bad years


well not everyone has 7 or more million dollars in liquid cash that they won't need. So it's possible that he'd need to unload other assets at a loss. Insurance isn't always a losing proposition. If you can't weather gigantic fluctuations in your cash flow, and most people and businesses can't, then you need insurance.
 
2014-02-03 01:08:40 PM
I'm pretty sure this guy knew what he was doing.
 
2014-02-03 01:09:47 PM

proteus_b: lennavan: as long as you can weather the bad years

well not everyone has 7 or more million dollars in liquid cash that they won't need. So it's possible that he'd need to unload other assets at a loss. Insurance isn't always a losing proposition. If you can't weather gigantic fluctuations in your cash flow, and most people and businesses can't, then you need insurance.


You might have noticed that everybody who's spent longer than one week in Houston knows that he can totally handle it.
 
2014-02-03 01:12:05 PM
Surprisingly no store here in Denver did anything like this.
 
2014-02-03 01:16:40 PM
Twinkles' guide to success:

If you fail, fail spectacularly!
 
2014-02-03 01:17:13 PM

proteus_b: lennavan: as long as you can weather the bad years

well not everyone has 7 or more million dollars in liquid cash that they won't need. So it's possible that he'd need to unload other assets at a loss. Insurance isn't always a losing proposition. If you can't weather gigantic fluctuations in your cash flow, and most people and businesses can't, then you need insurance.


Seven million dollars at retail. He didn't pay retail. The cost to him would have been almost certainly under one million since the mark up on furniture is huge. And for a business like this one million dollars is just another ad campaign.
 
2014-02-03 01:17:54 PM

Hermione_Granger: You can buy insurance to cover a gambling bet?


considering insurance is gambling itself... yes.
 
2014-02-03 01:23:05 PM
In most retail furniture stores, the markup is between 100% and 150%.  Gallery Furniture has been around for decades, sells solid wood furniture, and donates MILLIONS to charity each year.  The promotion may not of netted them a huge financial windfall...but it also didn't cut their legs out from under them.  You don't succeed in business by only taking sure bets.
Also...keep in mind...that if these types of promotions were held every week betting on the Houston Texans to win...Gallery Furniture more than made their money back.
 
2014-02-03 01:28:46 PM

Candawg: You don't succeed in business by only taking sure bets.


This was better than a sure bet.

Some stores have a 50% off sale.  This guy has a 50% chance of it being free, 50% chance of you paying full price sale.  If he only does that once, fine it's not a sure bet.  If he does it over and over and over again, in the long run, it's the same thing as a 50% off sale, except this generates more interest, excitement and publicity.

I'm betting he does this all the damn time, since he is in Houston and he's betting on a SEA v. DEN game.  If it was HOU in the Super Bowl, I might think this was a one time deal.
 
2014-02-03 01:36:32 PM
Think, people ... he is only giving away the wholesale cost of the furniture, NOT $7M ... I bet this costs him $2.5M at MOST.  The gain?  Lots of free ads plus a ton of people came in and bought less than $6k worth of stuff.

/not a FAIL
//slashies
 
2014-02-03 02:03:29 PM

lennavan: umad: RTFA. $7 million is not "free".

I am shocked that this thread is filled with such financial ignorance.

/not really

Says the guy who thinks this cost the store $7 million?

The promotion and the bet cost Mattress Mac something like $2-3 million.


Then I take it back. $2-3 million is totally the same thing as free. Tard.
 
2014-02-03 02:07:49 PM

umad: lennavan: umad: RTFA. $7 million is not "free".

I am shocked that this thread is filled with such financial ignorance.

/not really

Says the guy who thinks this cost the store $7 million?

The promotion and the bet cost Mattress Mac something like $2-3 million.

Then I take it back. $2-3 million is totally the same thing as free. Tard.


You think he paid $2-3 million to the news station to cover this?  One of us is a tard, that's for sure.
 
2014-02-03 02:07:54 PM

TheDirtyNacho: So he's paying for all these news stories, fark threads and countless discussions taking place around Houston?

Someone's ignorant here, but it's not me.


These news stories, fark threads and counless discussions are "free" in the same way the toy you get in your happy meal is "free."
 
2014-02-03 02:11:17 PM
umad:  fark threads and counless discussions are "free" in the same way the toy you get in your happy meal is "free."

Wait, McDonalds gives away happy meal toys for free to the vast majority of people and pays for it by charging advertisers?

I always thought you had to buy a happy meal to get one.
 
2014-02-03 02:11:32 PM

lennavan: You think he paid $2-3 million to the news station to cover this?


No, because I'm not farking retarded like you are. The news stations wouldn't be saying shiat if he didn't spend $2-3 million. It doesn't matter that he didn't give it to them. He still had to spend it before they would give him all of this "free" advertising.
 
2014-02-03 02:12:37 PM

lennavan: umad:  fark threads and counless discussions are "free" in the same way the toy you get in your happy meal is "free."

Wait, McDonalds gives away happy meal toys for free to the vast majority of people and pays for it by charging advertisers?

I always thought you had to buy a happy meal to get one.


You ordered your happy meal. Not the toy. The toy was "free".
 
2014-02-03 02:15:14 PM
The Mac's Daughters
img.fark.net
 
2014-02-03 02:22:30 PM
Yeah, let's be sure and have a thread when he goes out of business.  Or when subby opens a business.  I'm betting we'll never see either of those threads.
 
2014-02-03 02:23:32 PM

umad: lennavan: You think he paid $2-3 million to the news station to cover this?

No


How much do you think he paid the news station to cover this then?

umad: It doesn't matter that he didn't give it to them. He still had to spend it before they would give him all of this "free" advertising.


So what you are saying is he paid nothing to the news stations for this advertising.  Would you summarize that as "free" advertising?

umad: No


Okay, you're stupid.
 
2014-02-03 02:24:08 PM

umad: lennavan: umad:  fark threads and counless discussions are "free" in the same way the toy you get in your happy meal is "free."

Wait, McDonalds gives away happy meal toys for free to the vast majority of people and pays for it by charging advertisers?

I always thought you had to buy a happy meal to get one.

You ordered your happy meal. Not the toy. The toy was "free".


Oh, so you ordered fark?  How much did you pay?
 
2014-02-03 02:25:30 PM

lennavan: Would you summarize that as "free" advertising?


No, because as I said. I'm not a farking retard like you are.
 
2014-02-03 02:27:28 PM
Let's see, he has a promotion that grosses 7 million in 2 weeks.  Let's see what the next promotion grosses after non-stop national promotion for this one.

He'll probably run out of inventory.
 
2014-02-03 02:38:09 PM
Sounds like submittard is th3 fail
 
2014-02-03 02:41:36 PM

umad: lennavan: Would you summarize that as "free" advertising?

No


Oh, well if it wasn't free, how much did he give to the news to pay for the advertising?

umad: he didn't give it to them.


Ah.

umad: I'm not a farking retard


Right.
 
2014-02-03 02:56:32 PM
Wow, people pay a lot for furniture!
 
2014-02-03 02:58:55 PM
He only offered it if one team won.  My guess is that he teased the spread to even money and put a shiatload on Seattle to win with a Vegas sports book, thus offsetting any loss he would incur at his business.  He made a profit on it, trust me.

If I needed to furnish my house, that's what I would have done, only with Denver as a hedge.
 
2014-02-03 03:27:54 PM

kaduh: He only offered it if one team won.  My guess is that he teased the spread to even money and put a shiatload on Seattle to win with a Vegas sports book, thus offsetting any loss he would incur at his business.  He made a profit on it, trust me.

If I needed to furnish my house, that's what I would have done, only with Denver as a hedge.


He really wouldn't even need to tease it. He could have easily put big money on Seattle +2.5, hoped for a close loss by the Hawks and one sweet freaking middle
 
2014-02-03 03:36:45 PM
No Insurance?  damn stupid guy.

That said i would have liked to see his reactions as the Super bowl unfolded.
 
2014-02-03 04:08:29 PM

Pelvic Splanchnic Ganglion: There are insurance companies who will sell coverage to cover gambling losses?


You can buy insurance to cover any risk.
 
2014-02-03 04:41:48 PM

grimlock1972: No Insurance?  damn stupid guy.

That said i would have liked to see his reactions as the Super bowl unfolded.


Well who doesn't enjoy some healthy schadenfreude.
 
2014-02-03 06:25:01 PM

brobdiggy: Assuming no insurance, this IS a big fail , and here's why:

Furniture isn't something you buy often.  It's not like gas and groceries.  During this promotion, a whole bunch of people (who had been putting off buying furniture for a while) decided to buy a bunch (knowing that they would eventually need it anyway).  They bought now only because of the probability of getting it free.  (If Seattel would have lost, many would have tried to return the furniture or quit making payments on it.... but maybe Mac had "insurance" such as pay-up-front, no financing, no returns)...

But Seattle won... the result is that even if the customers "like" the furniture, most of the customers will not buy furniture again for 10 years.  Also, if they're the type of people that only bought from him due to the promotion, they'll buy the furniture somewhere cheaper next time anyway.

He took a loss.  I highly doubt this promotion gained him any new customers.  It only gained people who will try to take advantage of his next fail promotion, which will once again be a huge loss for him.


I think the most foolish part was doing this in the two weeks between the championship game and the Superbowl itself, consider how dominant Seattle looked most of this year.  This is the kind of promotion you're better off running at the start of the year before we can tell who is for real and who sucks (although that would also get less sales)

  Anyway, as for a loss of potential future customers, it probably isn't as bad as you think, because if you do the math, it was at most approximately 1167 customers ($7mil / $6k minimum purchase).  That's 1167 furniture sales in the Houston area, the 4th largest city, and 5th largest metropolitan areas in the U.S, with over 6 million people.  And depending on what people were buying, $6k in many cases will only cover 1 room, maybe 2.
 
2014-02-03 07:44:22 PM

sigdiamond2000: "Mattress Mac doesn't believe in insurance. He considers it a form of gambling."


which betting on sports totally isn't
 
2014-02-03 10:17:39 PM

SilentStrider: and if the moron had bought insurance, he could actually make more of a profit. instead, he's in the hole


If you have the capital to risk, self-insurance can be significantly cheaper than going to an underwriter.

There are 32 teams in the NFL.   So the odds of the Seahawks winning at the beginning of the season were roughly 1/32.... so the probability of him losing the insurance premium were around 97%.   That adds up over time.
 
2014-02-03 10:21:32 PM

Rising_Zan_Samurai_Gunman: And depending on what people were buying, $6k in many cases will only cover 1 room, maybe 2.


If you're talking high-end designer furniture, you can easily spend $6000 on a single piece.
 
2014-02-04 12:30:16 AM

grimlock1972: No Insurance?  damn stupid guy.



Why?

If you can afford it you will come out ahead in the long term by not having insurance. I used to work for a major retailer and I know for a fact they didn't have insurance for any of their stores except for the legally required public liability insurance. If a store burns down, they pay for it to be rebuilt. But they save so much money each and every year in not paying insurance premiums, multiplied by the number of stores they had, that if they have to pay for the odd rebuilding they still come out way ahead.
They are just doing exactly what an insurance company does, except they are keeping all the profit themselves.

Even Walmart does it in many areas. Are you calling them "damn stupid"?

As I posted earlier, over the long term you will lose more by having insurance. Insurers work out the odds and set the premium to ensure they always make a profit. The premiums for a 50/50 event would be more than 50% of the total sum insured, so over say four years assuming he loses half the time the figures would look like this:

Without insurance.
Year 1 lose $7m
Year 2 win, no loss.
Year 3 lose $7m
Year 4 win, no loss.
Total expense for promotion $14 million

With insurance.
Year 1 lose pay $4million insurance premium.
Year 2 win,pay $4million insurance premium.
Year 3 lose, pay $4million insurance premium.
Year 4 win, pay $4million insurance premium.
Total expense for promotion $16 million

By having insurance you are $2 million dollars worse off. (Those figures are at retail of course. His actual costs would have been far lower.)
 
2014-02-04 09:06:24 AM
Consider this: this promotion just got a BBC story about it.  $2-$3 Million for worldwide coverage of how good of a sport you are?  That's a freaking bargain.

And considering how he's the biggest furniture retailer in the Houston area, $2-$3 million really isn't much for him considering the return.  ESPECIALLY considering the return.
 
2014-02-04 11:46:56 AM
Flint Ironstag: grimlock1972: No Insurance?  damn stupid guy.

Why?

If you can afford it you will come out ahead in the long term by not having insurance. I used to work for a major retailer and I know for a fact they didn't have insurance for any of their stores except for the legally required public liability insurance. If a store burns down, they pay for it to be rebuilt. But they save so much money each and every year in not paying insurance premiums, multiplied by the number of stores they had, that if they have to pay for the odd rebuilding they still come out way ahead.
They are just doing exactly what an insurance company does, except they are keeping all the profit themselves.

Even Walmart does it in many areas. Are you calling them "damn stupid"?

As I posted earlier, over the long term you will lose more by having insurance. Insurers work out the odds and set the premium to ensure they always make a profit. The premiums for a 50/50 event would be more than 50% of the total sum insured, so over say four years assuming he loses half the time the figures would look like this:

Without insurance.
Year 1 lose $7m
Year 2 win, no loss.
Year 3 lose $7m
Year 4 win, no loss.
Total expense for promotion $14 million

With insurance.
Year 1 lose pay $4million insurance premium.
Year 2 win,pay $4million insurance premium.
+ 3 million profit = 1 million loss
Year 3 lose, pay $4million insurance premium.
Year 4 win, pay $4million insurance premium
. + 3 million profit = 1 million loss
Total expense for promotion $16 million10 million

By having insurance you are $2 million dollars worse better off. (Those figures are at retail of course. His actual costs would have been far lower.)


I don't disagree with your premise that buying insurance costs more.  Just adjusting the formula a little.  Don't know how much profit Mac makes, but the thread consensus seems to be 2-3 million on 7 million in sales.  The actual number will determine where you end up.

Obviously it does or insurance companies wouldn't be profitable.  It does offer the convenience of spreading out damage payments over time.  Much like a mortgage, you're paying not to get hit all at once.
 
2014-02-04 04:34:39 PM

bigghigg: Flint Ironstag: grimlock1972: No Insurance?  damn stupid guy.

Why?

If you can afford it you will come out ahead in the long term by not having insurance. I used to work for a major retailer and I know for a fact they didn't have insurance for any of their stores except for the legally required public liability insurance. If a store burns down, they pay for it to be rebuilt. But they save so much money each and every year in not paying insurance premiums, multiplied by the number of stores they had, that if they have to pay for the odd rebuilding they still come out way ahead.
They are just doing exactly what an insurance company does, except they are keeping all the profit themselves.

Even Walmart does it in many areas. Are you calling them "damn stupid"?

As I posted earlier, over the long term you will lose more by having insurance. Insurers work out the odds and set the premium to ensure they always make a profit. The premiums for a 50/50 event would be more than 50% of the total sum insured, so over say four years assuming he loses half the time the figures would look like this:

Without insurance.
Year 1 lose $7m
Year 2 win, no loss.
Year 3 lose $7m
Year 4 win, no loss.
Total expense for promotion $14 million

With insurance.
Year 1 lose pay $4million insurance premium.
Year 2 win,pay $4million insurance premium. + 3 million profit = 1 million loss
Year 3 lose, pay $4million insurance premium.
Year 4 win, pay $4million insurance premium. + 3 million profit = 1 million loss
Total expense for promotion $16 million10 million

By having insurance you are $2 million dollars worse better off. (Those figures are at retail of course. His actual costs would have been far lower.)


I don't disagree with your premise that buying insurance costs more.  Just adjusting the formula a little.  Don't know how much profit Mac makes, but the thread consensus seems to be 2-3 million on 7 million in sales.  The actual number will determine where you end up.



You can't just add the profit to one without the other. Revised your way the actual figures would be:

Without insurance.
Year 1 lose $4million (The actual cost of the furniture given away)
Year 2 win, profit of $3 million.
Year 3 lose$4million (The actual cost of the furniture given away)
Year 4 win, profit of $3 million.
Total expense for promotion $14 million $2 million.

With insurance.
Year 1 lose pay $4million insurance premium, make $3million profit, result $1million loss.
Year 2 win,pay $4million insurance premium. + 3 million profit = 1 million loss
Year 3 lose, pay $4million insurance premium, make $3million profit, result $1million loss.
Year 4 win, pay $4million insurance premium. + 3 million profit = 1 million loss
Total expense for promotion $16 million10 million $4 million.
 
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