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What is a Quantity Discount?

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  • Last Modified Date: 31 August 2016
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A quantity discount, also referred to as a volume discount, is a reduction in price given to an entity that buys a large quantity of items and goods. Most commonly, quantity discounts are given to distributors who buy large amounts of a given item from a manufacturer and then turn around and sell that item to end-users. Individuals can also obtain a quantity discount in certain situations.

The most basic example of a quantity discount can be observed in the concept of warehouse stores and bulk grocery buying. An individual who visits a large warehouse store may receive a lower price per role on toilet paper, for example, than a person who buys a single role in a grocery store. Likewise, a person who bulk buys a large quantity of any other product, either from a warehouse store or from special bulk sections in grocery stores, may also receive a discount for buying in large quantities.

Such discounts are also issued to businesses. For example, Wal-Mart is able to offer low prices in part because it buys such large volumes of goods from suppliers. It can demand low prices from suppliers, who are dependent on Wal-Mart's business, and receive these discounts from suppliers who bid low prices in order to get the large amount of business that Wal-Mart promises.

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There are many benefits to a company from issuing a quantity discount. First, it may have lower marketing, packing and shipping costs. When a company ships 100 products to 100 different individuals, each product must be packed separately and shipped separately. It is far less costly to ship those same 100 products to one individual.

Likewise, the marketing costs of a company with a large-volume purchaser are much lower. For example, if a company needs to sell its 100 products to 100 different people, that company must market the product to convince 100 people to buy it. On the other hand, if a company is aware that a given entity will buy the full 100 products that it produces, it has a large amount of guaranteed business and does not need to engage in the widespread marketing of its product.

When a company receives a quantity discount, it also benefits because it can pass the savings on to the consumer, thus enticing more buyers. Alternatively, it can keep the savings and increase its bottom line or profits that it makes. It is thus advantageous to both buyer and seller to take advantage of a quantity discount.

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anon330160
Post 7

I am a newbie and have a product to sell. I have approached a distributor to market it for me. I am not sure how much discount should I give him. I am thinking if he orders 500-1000 sets I could give him a 50 percent discount and 1000 sets and above a 55 percent discount. My retail price is 35.90 per unit. Any comments?

cupcake15
Post 6

@Cafe41 - I know what you mean. I use coupons for the more expensive items that I buy, and I love the savings. I just don’t have time to clip coupons on everything. I wish I did.

I want to say that sometimes a company will offer its client a trade discount for doing significant business with them. My husband’s company has a business relationship with a local office supply company and my husband’s company and all of the employees receive a 70% discount for office supplies on any purchase.

I know that when my husband worked for a large small package company and logistics provider they had volume discounts for the employees on all sorts of businesses. It

was great. It was like an additional level of benefits that you never anticipated.

This was mainly because the company was so large that everybody wanted to do business with them. I remember that I subscribed to a cell phone provider and got a 20% discount on the cell phone charges as well as a discount on the phone and the accessories too. It was great.

cafe41
Post 5

I check the unit price too sometimes. I like to follow the sales flyers of all of the supermarkets and then compile a bunch of coupons to match the items that are sale.

What I do is collect multiple sets of coupons for an item that a buy a lot and when it goes on sale I buy a lot of the product and save a bundle. It is like a cumulative quantity discount.

I usually subscribe to a lot of coupon clubs and you would be surprised how much money you would save using those coupons. I got $250 worth of groceries for only $71 dollars and it felt great.

I know that there are people

that save more, but I am happy with my results. I think the trick is to buy in bulk and have a storage area that you can use to store the extra goods. Stockpiling products like this is really common and it is the best quantity discount formula out there.

Certain grocery items go on sale on a set schedule and when you learn the schedule you will know what products to buy and when to save the most money.

popcorn
Post 4

Some of the best things to buy at a quantity discount are things like sanitary items and household supplies. I love that you can find refillable containers for most cleaners if you look around. This is not only great for your pocketbook but for the environment as well.

Nowadays, I am finding that many grocery stores are offering large, easily disposable and recyclable refills for things like dishwashing detergent, and laundry soap. This kind of packaging is fantastic for those who are looking to save money and don't want to keep having to buy the same bulky plastic containers over and over again.

If you are looking to buy sanitary items, I find that most stores seem to have their

sales towards the middle of the month. This is interesting to me as they often offer buy 3 get one 1 type deals which can save you a lot without forcing you to head to the wholesale club stores and buy a membership.

drtroubles
Post 3

I think that buying at wholesale clubs is a great way to get quantity discounts if you are picking up nonperishable items and have the space to store the goods in your home. There are also lots of coupons supplied to those that become members of the wholesale clubs.

One thing I find I save the most on is meat. Buying in quantity for the discount is easy to do if you have a large freezer. Properly storing meat doesn't take too long and getting a large package of say ground beef on sale is a good idea if you know you'll use it regularly. There are lots of guides online that detail how long you can save what, so do some research and hit the wholesale clubs.

EdRick
Post 2

@jholcomb - I agree with you in theory, although my teenage son and his friends are eating me out of house and home to the extent that I do save money shopping in quantity!

Something I've noticed doing that, though, is that the largest container isn't always the cheapest! Sometimes the store will show you the price per ounce, other times you have to calculate it yourself, but sometimes it's actually more expensive to get the giant sizes. (I can't imagine why. Maybe because if the store doesn't sell as many of those, they don't get as much of a quantity discount?)

jholcomb
Post 1

Buying at wholesale clubs is really only going to save you money if you are willing to store things, have a big family, and/or are very disciplined. It's way to easy to buy way too much, and then let it go to waste. For many people, you'll be better off if you just shop at the cheapest regular store you can and buy only just what you need. Don't even pay much attention to sales. If you were going to buy something anyway and it's on sale, you might get two if it will keep, but don't buy something that wasn't on your list just because it's on sale!

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