Trade Discount Rate Calculator
Calculate the percentage reduction offered by manufacturers to wholesalers or retailers.
Trade Discount Rate:
0%
Discount Amount:
$0.00
Please ensure List Price is greater than Net Price and both values are positive.
How to Calculate Trade Discount Rate
A trade discount is the reduction in the list price of a product that a manufacturer or wholesaler provides to a business customer. Understanding how to calculate this rate is essential for B2B pricing strategies and inventory valuation.
The Formula
Trade Discount Rate = [(List Price – Net Price) / List Price] × 100
Calculation Steps:
- Identify the List Price: This is the manufacturer's suggested retail price (MSRP) or catalog price.
- Identify the Net Price: This is the actual amount the retailer or wholesaler pays after the discount.
- Subtract: Subtract the Net Price from the List Price to find the total Discount Amount.
- Divide: Divide the Discount Amount by the original List Price.
- Convert: Multiply the result by 100 to get the percentage rate.
Practical Example
Suppose a furniture wholesaler offers a dining table with a List Price of $1,200. They sell it to a local retailer for a Net Price of $900.
- Discount Amount: $1,200 – $900 = $300
- Calculation: ($300 / $1,200) = 0.25
- Discount Rate: 0.25 × 100 = 25%
Why Businesses Use Trade Discounts
Unlike cash discounts (which encourage early payment), trade discounts are used to differentiate between different tiers of customers (e.g., wholesalers vs. retailers), to manage price fluctuations without changing published catalogs, and to reward high-volume purchasers.