Trade discounts, a critical concept in business transactions, are price deductions granted by manufacturers or wholesalers to retailers or distributors. For instance, a retailer purchasing a product listed at $100 may receive a 20% trade discount, resulting in a final price of $80.
These discounts play a significant role in supply chains, offering advantages to all parties involved. Retailers benefit from lower prices, enabling them to increase margins or offer discounts to customers. Manufacturers and wholesalers, in turn, foster long-term relationships with customers and maintain stable demand for their products. The historical development of trade discounts traces back to the 19th century, when businesses sought ways to streamline transactions and provide incentives for bulk purchases.