When shopping for certain items, normally those that carry with them a considerable cost such as furniture, appliances, and automobiles, you may have heard the terms net price and sticker price.
They are commonly used terms that may sound quite similar at first. But there are differences between them.
Understanding which is which will help you make a better-informed decision about your next purchases. These will be purchases in which both prices may be present or available to the buyer.
What is a Net Price?
A net price is the value of the good, item, or serve after all taxes and other costs are added and all discounts have been subtracted. In other words, the net price is the final price that is paid by the consumer.
For example, if an item is priced at $100, there may be an additional cost that is due to the tax on the item or an additional good or service that is added into the price as well. This additional price may be something like shipping costs on items that will be sent to your home.
Now, add in all the discounts that are available for the item or the service. As part of the example, the $100 item may have taxes and shipping costs that total $20. This means the price is now $120. But there are discounts that are applied as well. A customer may have a 10% off coupon for the price of the item. Such discounts are usually applied before the taxes and additional costs.
Following the example, the $100 item has a 10% off coupon which reduces its price to $90. Because the item costs less the tax should also be less because the value has dropped. However, an additional cost such as a shipping fee may stay the same. If we assume a 10% tax on the $90 item, the cost is now $99 with the same shipping fee that results in the final price being $109.
Another term for net price is negotiated price. This is a price which is agreed to by the buyer and seller even though the item or service may have a sticker price. The negotiated price is considered a set price that applies to the purchase of the item or service.
What is a Sticker Price?
The sticker price is simpler in terms of what an item will cost. A sticker or list price as it is called applies to the cost printed or assigned to the item by the owner of the store or business. In other words, if you see an item that has a sticker price, it will be what is printed on the sticker.
Items which are normally purchased under a sticker price instead of a net price tend to be cheaper or less expensive items. These are most commonly items that you find in a grocery or department store. The items will have an advertised price. This is associated with stickers that are placed on the item to indicate its printed price.
In addition to being known as a sticker or list price, you may hear the term MSRP. This stands for manufacturer’s suggested retail price. This is the price that may be suggested by a manufacturer, but the term sticker price may include prices set by the retail store owner. Put simply, it is the price printed on the item or advertised in the catalog, newspaper, or online.
What is the Difference Between Net Price and Sticker Price?
The main difference between a net price and a sticker price is that the sticker price is the starting point for the net price. In order to determine the net price, you must start off with the sticker price of the item. That means the cost of the item before taxes are included or other costs such as shipping are calculated, and discounts then applied.
A net price includes every aspect of the price that is calculated. While a sticker price is only about the price of the item or service itself.
For example, if you see a price listed for an item in a store, that is not the final price you will pay. That is because a sticker price does not include taxes, only the price of the item itself. This means when you buy an item with a sticker price of $100, that is the starting point of your purchase.
You now apply any discounts that you may have, followed by additions to the price such as taxes or shipping costs. The final price becomes the net price.
Net Price VS Net Cost and Other Types of Costs
There may be some confusion about the terms net price and net cost as they seem to be identical at first. However, there are some important differences between the two. A net cost is the amount which is paid after all discounts or rebates have been applied. A net cost does not include taxes or additional costs such as shipping.
A net price includes all discounts and costs that are added to reach a final total. This is what you pay when you are paying the net price for an item or service.
A gross price is also not the net price. A gross price is the total cost of the item before discounts or taxes are applied. This does not include additional charges such as shipping. For example, if the price of an item is $100 and the shipping is $10 and no other additional charges are applied, then the gross price is $110. Now discounts and taxes can be applied which will bring in the net price of the item.
For business owners, understanding the net price of items assists with the pricing strategy associated with the sticker price. This means that when the sticker price is being considered, it will be calculated to see its final net price. In this manner, a store owner can price their items knowing how much they will finally sell for, including taxes, discounts, shipping, and other added costs.
Benjamin is a certified financial advisor, with over 10 years of experience in the industry. He is knowledgeable about various business and financial topics, such as retirement planning and investment management. Ben has been recognized for his work in the financial planning industry. He has also been featured in various publications.