What is a trade discount?  

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

A trade discount is nothing more than just a discount like you are sure to understand just from everyday life.  It is when a seller reduces the price on an item by a certain percent (usually) in an attempt to get more people to buy the product.

Trade discounts can be single (40% off, for example) or can be offerred in series (more than one discount, like 25% and another one of 15%) but figured somewhat differently than a usual discount).

So, this is not anything strange -- it's just what you would usually think of as a regular discount.

krishna-agrawala's profile pic

krishna-agrawala | College Teacher | (Level 3) Valedictorian

Posted on

Discount in general means a reduction in list price or regular price given by a seller to a buyer. The discounts may be of different types based on the status of seller, buyers, and other factors related to the sale.

Trade discount is the discount given by manufacturers and traders (like distributors, wholesalers and retailers) to other traders who buy the products for resale rather than for personal consumption. Usually, but not necessarily, trade discount is related to a minimum purchase quantity and selling units that is higher than the retail sales quantity. For example, a retailer may sell one pencils to his customer, but has to buys these pencils in larger packings, say boxes of one dozen pencils.

Trade discount should not be mixed up with quantity discount, which may be offered to traders as well as retail customers for buying in bulk. Trade discount is offered to only traders buying the goods, as they are considered trade partners in selling the goods to retail customers rather than just customers. Trader may be offered other type of discounts also for other specific reasons also. For example, cash discount is given to traders for paying for the goods purchased in cash on delivery, rather than buying goods on credit.

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