Quantity Discounts: An Overview and Practical Guide for Buyers and Sellers

Abstract

Sellers commonly provide price discounts for large orders; in fact, quantity discounts have existed as ubiquitous tools of commerce for hundreds of years. In some industries today, quantity discounts are more common than not in business-to-business transactions. For example, large discount retailers demand price breaks from their suppliers, and they typically then pass on a portion of the savings to final consumers. Practitioners face the issue from two sides. For sellers, what form of quantity discounts makes the most sense, and how should the discounts be priced? What role should quantity discounts play in the larger contract negotiation scheme? For buyers, how many units should be ordered when faced with a quantity discount schedule? And under what conditions should a buyer take the lead and attempt to negotiate a discount schedule from its supplier?