A trade discount is a price deduction offered to businesses purchasing wholesale merchandise from manufacturers or distributors. Calculated as a percentage of the list or catalog price, it helps businesses secure better pricing on large orders. Illustratively, a 15% trade discount on a $100 item reduces its cost to $85.
Trade discounts present significant advantages, including reduced purchase costs and improved profit margins for businesses. They can also foster stronger relationships between suppliers and buyers.Historically, trade discounts gained prominence during the Industrial Revolution as a way for manufacturers to incentivize bulk purchasing and streamline distribution.