What is a Trade Discount?
A Trade Discount refers to a discount that provides a certain discount on the retail price of the product if it is purchased in large quantities. Trade Discounts are offered to increase the sale of the product. Sellers might keep buyers in the long run by giving Trade Discounts because that offers buyers confidence. It also manages buyer-seller relationships.
Key features of Trade Discount:
- Price Reduction: Trade Discounts lower the listed price of products or services, often as incentives for bulk purchases or favorable terms.
- Customized Deals: Unlike public discounts, Trade Discounts are negotiated between suppliers and customers based on factors like quantity or timing.
- Post-Purchase Adjustments: These Trade Discounts aren’t applied immediately but appear on invoices after purchase, allowing for tailored discounts.
Difference between Cash Discount and Trade Discount
Cash Discounts and Trade Discounts are often used interchangeably. They are offered to attract customers and increase sales. The main purpose of both discounts is to increase product sales. A Cash Discount is offered by the seller to the buyer when the buyer is paying the bill, whereas, a Trade Discount is offered by the seller to the reseller during the time of purchase of a product.