Trade Discount
A discount given by the brand or distributor to the retailer on the listed price, usually based on volume, outlet class, or channel type.
Full definition
A trade discount is a reduction from the listed price offered to a retailer as a standard part of the commercial terms between the distributor and the outlet. Unlike cash discounts which incentivize faster payment, trade discounts reward the act of purchasing itself — typically scaled by volume slab, outlet category, or channel type. In Indian FMCG, trade discounts range from 2-8% for general trade and can go higher for wholesale and institutional buyers.
Trade discounts interact with MRP in a critical way. Since India is an MRP-governed market, the retailer buys at MRP minus trade discount minus scheme benefit and sells at or below MRP. The retailer's margin is therefore a function of the trade discount plus whatever trade scheme is running. Getting this margin architecture right is the core job of the brand's channel pricing team.
A well-configured scheme engine applies trade discounts automatically at the point of order booking, based on rules like outlet class, quantity slab, or geography. The discount flows through to the tax invoice and reduces the taxable value for GST calculation, keeping the billing fully compliant.
Real-world example
A Godrej Consumer distributor in Hyderabad offers 5% trade discount to A-class kirana stores buying more than Rs 5,000 per order, and 3% to B-class stores, automatically applied during billing.
Where it applies
Applicable industries
This term is relevant across the following SpireStock-supported industries.
How SpireStock handles it
Related SpireStock features
The concepts described above are implemented end-to-end in these product modules.
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