trade discount definition

A discount that often varies by customer. For example, a company may sell its products to a variety of resellers. Some of the resellers might buy $1 million of products each year, other resellers might purchase $100,000, and still others buy less than $10,000 per year. The company would probably have lower selling prices for the large-volume resellers and have higher selling prices for the low-volume resellers. One way to achieve this is to have a catalog showing just one selling price for each item, but to offer discounts that vary with the volume purchased. That discount is known as a trade discount.