Volume Discount

DEFINITION of 'Volume Discount'

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.

BREAKING DOWN 'Volume Discount'

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.

RELATED TERMS
  1. Quantity Discount

    An incentive offered to a buyer that results in a decreased cost ...
  2. Volume

    The number of shares or contracts traded in a security or an ...
  3. Cash Discount

    An incentive that a seller offers to a buyer in return for paying ...
  4. Discount Rate

    The interest rate charged to commercial banks and other depository ...
  5. Market Discount

    The difference between a bond's stated redemption price and its ...
  6. 1%/10 net 30

    A way of providing cash discounts on purchases. It means that ...
Related Articles
  1. Options & Futures

    Interpreting Volume For The Futures Market

    Learn how to read the volume reports, look at the relation to liquidity and interpret volume using open interest.
  2. Charts & Patterns

    How To Use Volume To Improve Your Trading

    The basic guidelines to analyzing volume may not apply in all situations, but overall, they can help direct entry and exit decisions.
  3. Trading Strategies

    Technical Analysis: The Importance Of Volume

    By Cory Janssen, Chad Langager and Casey MurphyTo this point, we've only discussed the price of a security. While price is the primary item of concern in technical analysis, volume is also extremely ...
  4. Investing Basics

    Discounting With The Discount Rate

    The discount rate is the interest rate you need to earn on a given amount of money today to end up with a given amount of money in the future. Let's say you need $1,000 one year from now to go ...
  5. Professionals

    Valuation Discounts for Business Interests

    Valuation Discounts for Business Interests
  6. Investing Basics

    Why Use a Discount Broker?

    A discount broker is a stockbroker that does not offer clients investment advice, but trades shares for a smaller commission than a full-service broker.
  7. Retirement

    Benefit From Senior Discounts

    Older people can save a surprising amount using senior discounts. With Social Security payments flat for next year, this is the time to start using them.
  8. Forex Education

    On-Balance Volume

    The on-balance volume indicator (OBV) is one of the most well-known technical indicators, and it focuses on the importance of volume and how it can affect a given price and asset's momentum.
  9. Technical Indicators

    Use Market Volume Data to Determine a Bottom

    Market bottoms often carve out classic volume patterns that let observant traders make fast and accurate calls.
  10. Trading Strategies

    How To Tackle Intraday Volume

    Measure the flow of intraday volume to estimate the emotional intensity of the crowd.
RELATED FAQS
  1. What is the difference between the cost of capital and the discount rate?

    Learn about the differences between the cost of capital and the discount rate as they relate to estimating a required return ... Read Answer >>
  2. How do central banks impact interest rates in the economy?

    Learn how central banks such as the Federal Reserve influence monetary policy in the economy by increasing or decreasing ... Read Answer >>
  3. How can an investor profit from the increase in popularity of discount brokerages?

    Find out how investors benefit when brokerages compete with each other, and how discount brokerages are changing the market ... Read Answer >>
  4. What are the arguments in favor of setting a low discount rate?

    Read about some of the macroeconomic explanations that are used to justify setting a low interest rate at the Federal Reserve's ... Read Answer >>
  5. Why is the Uptick Volume important for traders and analysts?

    Find out why technical analysts and traders keep track of uptick volume to better assess the momentum of a stock's price ... Read Answer >>
  6. How is the economic order quantity model used in inventory management?

    Understand what types of costs make up total inventory costs, and learn how the economic order quantity model is used to ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center