Wayfair Interview Question: 50,000 shoppers with a 0.5% c... | Glassdoor

## Interview Question

Business Intelligence Analyst Interview Boston, MA

# 50,000 shoppers with a 0.5% conversion rate for a chair

that costs \$250. Wayfair makes a 27% profit. Next, 50,000 shoppers will get a 10% discount. What is the conversion rate they must achieve to achieve the same profits as before?
Tags:
technical, analytical, business case

40

Step 1: Calculate profit (250 * 250 * 0.27 = 16875)
Step 2: Calculate discount price (250 * 0.9 = 225)
Step 3: Calculate price of chair (250 * 0.73 = 182.5)
Step 4: Calculate profit margin ( (225 - 182.5)/225 = .19)
Step 5: Calculate new conversion rate (225 * 0.19 * x = 16875)
x = 395
395/50000 = 0.79% the new conversion rate

Interview Candidate on Nov 21, 2014
18

This is incorrect
Old revenue = 50000*250*.005=250*250
New revenue with conversion rate r% = 50000*r*250*.9 = old revenue = 250*250
r = .55%

Anonymous on Jul 9, 2015
11

Scenario 1
Number of sales=50,000*.5/100 = 250. Revenue=250*250 = 62,500. Profit is 27%. Therefore 62,500 = 1.27*cost
Therefore cost = 49,212.598. Profit = 62,500-49212.598 = 13,287.40. Cost of chair = 250/1.27 = 196.85
Scenario 2
Number of sales = 50,000*r/100 = 500*r (r is new converion rate)
Revenue = 500*r*.9*250
Total cost = 500*r*196.85
Profit = 500*r(250*.9-196.85) = 13,287.40
500*r*(28.1496) = 13,287.40. Therefore r = 0.944.
The first answer considers profit as margin (percentage of sales) which seems incorrect or needs to be clarified

Anonymous on Jul 23, 2015
4

Number 2 is wrong, number 1 is right. Just because revenues equal doesnt mean profits will equal - they sacrifice profits when they decide to give the sale

Anonymous on Oct 27, 2015
1

Do they expect you to do this in your head, or will they give you pen/paper and a minute?

Thomas on Feb 7, 2016
5

July 9th Answer is the correct answer. It is not hard:
Initial profit is = 50000 * 0.005 * 250 * 0.27 (No need for the calculator yet)
After sale profit = 50000 * x * 250 * 0.01 * 0.27 (Still don't need the calc)
The question asks for the conversion rate such that profit are the same before and after the sale, so...
Initial profit = After Sale profit
50000 * 0.005 * 250 * 0.27 = 50000 * x * (250 - (250 * 0.01)) * 0.27 (divide through &amp; cancel)
0.005 * 250 = x * 225
x = (0.005 * 250) / 225
x = 0.0056 or 0.56%

Hans on Mar 8, 2016
1

You don't actually need to calculate anything other than the new conversion rate. Why? Look at the equation below:
(customer sent = 50000) * (customer bought / customer sent = 0.005 conversion rate) * (revenue / customer bought = 250) * 0.27 (profit / revenue) gives (profit / customer sent). this should be equal to the one after discount. only (revenue / customer bought) changed -&gt; it decreased 10%. therefore, conversion rate needs to increase by (1/0.9), which gives 5.56%.

simple on Jul 16, 2016
0

July 9 is correct. Nov 21 is incorrect.

Michael on Nov 10, 2016
0

July 9 is wrong because the profit margin changes(As sale price changes, but the cost doesn't change)

Anonymous on Feb 16, 2017
0

\$250 is the actual cost of the chair (profit not included) or the price listed？？

Anonymous on Aug 7, 2017
0

Answer from Nov 21 is correct while July 9 is incorrect. The latter one is just making the revenues equal before and after the sale. It is ignoring the fact that profit % i.e. cost price is also changing after the sale.
Before the sale cost price is 182.5*250. After sale cost price would be 182.5*(no &gt;250), as with new conversion rate more customers will be buying. So even if the revenues are equal, profits won't be equal.

Anonymous on Sep 25, 2018
0

Total Shoppers 50000
Conversion Rate 0.5
Total Customers 250

Selling Price 250
Profit % 27
Cost price 196.8503937
Profit in \$ 53.1496063

Total Sales 12500000
Total Profit 13287.40157

Scenario 2:

Selling price 225
Profit 28.1496063

Customers required 472.027972

Conversion Rate in % 0.944055944

Please note that the \$250 selling price is (Cost price + 27% profit) on it. So Nov 21, 2014, assumption of doing .27*250 to get the profit is wrong.

FatherStrum on Oct 9, 2018
0

No of chairs sold = 50000*0.005 = 250
Selling price of chairs sold = 250
Cost price of chairs = 250*(1-0.27) = 182.5
Scenario 1
Total profit = no of chairs sold * selling price - no of chairs sold * cost price
= 250*250 - 250*182.5
= 62500 - 45625
= 16875
Total profit = 16875

Scenario 2
No. of chairs sold = x
Selling price = 250*(1-0.1) = 225
Cost price = 182.5
Total profit = no of chairs sold * selling price - no of chairs sold * cost price
16875 = x*225 - x*182.5
x = 16875/42.5
x = 397.06
397.06 or 398 chairs should be sold to make the same amount of profit

No of chairs sold = 50000*conversion rate
398 = 50000* conversion rate
conversion rate = 398/50000
= 0.00796

Required conversion rate would be 0.8%

kartik on Feb 15, 2019
0

- Number of customers that purchase chair: 50,000 * .5% = 2500 Customers
- Revenue: 250 Customers * \$250 = \$62,500
- Profit: \$62,500 * 27% = \$16,875
- Discount Price: \$250 * 90% = \$225
- Revenue with Discount: (\$225*X customers) * 27% = \$16,875
- X = 278 Customers
- Conversion Rate: .556%

Anonymous on Mar 12, 2019