A quantity discount is a reduction in the price of a product if the buyer chooses to acquire goods in a large quantity. This discount may be issued by the seller to the customer at a later date in the form of a credit, after the full amount has been delivered. For example, a customer intends to order 2,000 widgets over a three-month period. The seller waits for the period to be concluded before tallying the amount delivered to the customer, and then issues a credit based on the unit quantity delivered. Alternatively, the discount may be applied to a single delivery of goods, in which case it is deducted from the invoice sent to the customer.
A quantity discount may be offered by a seller for a number of reasons. For example, the seller may be trying to reduce the amount of its on-hand inventory, which is in danger of becoming obsolete. Or, it wants to schedule a long production run to reduce its per-unit costs, and so offers quantity discounts to its customers to see who is interested.
As an example of a quantity discount, a seller offers a 10% discount if customers buy at least 100 purple widgets. The normal retail price of this widget is $10. A customer buys 100 units. The resulting price paid is a gross amount of $1,000 (calculated as $10 x 100 units), from which the 10% discount is subtracted to arrive at a net price of $900.