What it means
Retailers advertise sale prices to attract customers. If the item sells out before a shopper gets to it, the shopper may feel misled.
A rain check lets the customer come back when stock arrives and still pay the advertised price. In some places the practice is expected or even required when a retailer advertises an item without enough stock.
The details, such as how long the rain check lasts and how many items are allowed, are set by the store's policy or local rules. Stores usually record the item, the price, the quantity and an expiry date.
The commercial effect is that the retailer gives up part of its normal margin on those later sales. If the item will be restocked at a normal price, the store sells it at the lower sale price instead.
This cost is the price of keeping customer trust and the chance that the shopper buys other items on the next visit. The finance team should track outstanding rain checks, because they are promises to sell at a lower price in the future.
Large numbers can reduce expected margin, and they need to be considered in forecasts and promotion planning. Good inventory planning and realistic promotion forecasts make rain checks less necessary.
The phrase is also used informally to mean postponing an invitation, as in "I'll take a rain check on lunch". In that sense there is no money involved, just a polite deferral.
In finance conversations, though, the sale-price meaning is the standard one. Rain checks can also be used by event organisers, airlines and restaurants in a similar spirit.
The common thread is that the customer keeps the right to the original offer at a later time. The business keeps the customer, at the price of some flexibility.
In practice
Real-world examples.
Example
A supermarket advertises a bundle of discounted coffee, and stock runs out by midday. A shopper asks for a rain check and receives a slip entitling her to the sale price for two weeks. She returns once new stock arrives.
Example
A hardware store promotes a power drill at a low price for one weekend. The shelf is bare on Saturday afternoon, so the manager issues rain checks to the waiting customers. The finance team records how many are outstanding in its weekly report, and orders more stock for the following week.
Example
A restaurant offers a limited seasonal dish that sells out early. It gives guests a voucher to try the dish at the same price later in the month. The chef uses the voucher count to plan how many portions to prepare, and the owner treats the unused vouchers as a measure of how many guests really came back.
Formula
Calculation
Cost of honouring rain checks = (regular price - sale price) x number of units
Suppose a store advertises a printer at a sale price of $80, against a regular price of $100. It runs out of stock after selling 300 units and issues 200 rain checks.
Step 1: price gap per unit = $100 - $80 = $20.
Step 2: margin given up = 200 x $20 = $4,000.
This $4,000 is the extra discount the store gives compared with selling the same units at the regular price, and it should be weighed against the goodwill and repeat sales it protects.Case study
Seen in the real world.
Hollis Home Electronics is a fictional retailer used for illustration. It advertised a printer at $80 instead of the usual $100, but ordered too few units. By Saturday lunchtime the store had sold 300 printers and had 200 customers asking for a rain check.
In this illustrative story, the store manager issued rain checks valid for 30 days, giving up $20 per unit, or $4,000 in total. The finance director took the number as a warning that the forecast had been too low. The next promotion used a higher stock level based on the response, and rain checks fell to a handful.
Customers were pleased by the way the store handled the problem, and many bought accessories when they returned for their printers. The manager measured that the average basket on a rain check visit was higher than normal. The extra sales offset part of the $4,000 discount.
Watch out
Common mistakes.
- Advertising a sale price without enough stock. Shoppers will be disappointed, and the store may face complaints or rules about misleading offers.
- Forgetting to track outstanding rain checks. They are future discounts that affect margin.
- Issuing rain checks with no expiry date. State a time limit and quantity limit clearly.
Questions
People also ask.
What is a rain check?
It is a promise that a customer can buy a sold-out sale item later at the original sale price.
Does a rain check cost the retailer money?
Yes, the store gives up the difference between the regular price and the sale price on those later sales.
Where does the term come from?
It comes from sports events cancelled by rain, where ticket holders received a check to attend another day.
From the founder's library
Take it further with the book.
Build your financial confidence beyond this definition. Shihan's full-length guide, Accounting Fundamentals, takes the same plain-English approach and turns it into a complete, practical playbook for non-finance managers, business owners and students - with chapter-end quiz answers and presentation slides included.
25% off with code MMHQ25, applied at checkout. Priced in USD - checkout may show the equivalent in your local currency.
View the book and save 25%