Discount codes

Discount codes are the reductions applied at checkout: coupon codes a customer enters and automatic discounts a store applies to qualifying carts. They come off before tax, they are visible in every report, and they are the half of discounting most merchants track, which is exactly why the other half hides.

A code is cheaper than it looks per unit and more expensive than it looks per month. Because VAT and the payment fee both shrink with the price, a ten percent code costs slightly less than ten percent of the sticker in real money. But it comes out of contribution, not out of revenue, so on a typical basket it removes a quarter of what the order was keeping.

The volume a promotion has to bring just to stand still follows from that: divide the contribution before the code by the contribution after it. Most codes are judged against revenue instead, which is why most codes look better in a report than they were in the bank.

Automatic discounts belong on the same line as entered codes, because they are the same event from the customer's side. A statement that counts one and not the other reports a discount rate that is quietly incomplete, and the gap grows with every cart-level promotion a store runs.