Volume Discount

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DEFINITION

A financial incentive for individuals or businesses that purchase goods in multiple units or in large quantities. The seller or manufacturer rewards those buying in bulk by providing a reduced price for each good or group of goods. Volume discounts allow businesses to purchase additional inventory at reduced cost, and allow sellers or manufacturers to reduce inventory by selling more units to incentivized buyers.

INVESTOPEDIA EXPLAINS

Volume discounts allow buyers to purchase goods at a discounted rate. These savings are often passed on to consumers. For example, Wal-Mart is able to purchase such large quantities of each particular good that it routinely receives volume discounts from its vendors. Wal-Mart's customers, in turn, are able to purchase these goods for less money than if they went to a store that did not buy in such great volume. Volume discounts are often tiered; that is, a specific discount is applied to X number of units. The discount increases as the number of units is increased.


Some brokerage firms offer volume discounts on commissions charged depending on the level of investment or trading activity.




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