What is Sale Discount? Its Advantages vs Disadvantages

No matter you are trading with China or not, it is necessary for your organization to realize that once your goods are successfully sold, what should be the exact price of each item as well as the duration of each order payment. In addition, you should find out what are the legal agreements or stipulations shall apply to merchandise item returns, if any.

In this blog post, we will discuss about offering sale discounts, a promotion method that have widely been used for sellers to attract more customers to buy their products or services. Some sellers may even use it as a good marketing campaign to promote their own brand names. We will also discuss about key advantages v.s. disadvantages for offering this kind of sale discount or promotion.

In real business world, different companies can quote their item prices by utilizing different ways. Most merchants basically quote their item prices at an acceptable level that they are willing to sell. Certain merchants, like wholesalers or manufacturers, may quote their item prices as just a percentage of their normal catalogue prices. Their percentage reduction can be approximately 30% or even more, and such sales reduction is regarded as a merchandise discount.

For instance, if an item price is listed as $2,000 with a merchandise discount of $600 (equivalent to 30% off), the seller then declares sell price as $1400 (after discount) and the buyer also records sale price as $1400. Do bear in mind that the seller may further increase or decrease this item selling price, just depending on actual market responses. As a result, item selling price can be flexibly adjustable based on real-time market demand and supply conditions (i.e.: quantity of item being sold out, quantity of physical stock item being left in stores, or quantity of item available from suppliers etc).

Furthermore, terms of sales (ToS) are normally stated on sale invoices for listing out sort of applicable terms to sale agreement. For many industries, duration of payment is usually expected for a short period of time after the purchase. If payment duration is for 20 or 15 days, then there will show "n/20" (net 20) or "n/15" (net 15) on your sale invoice, which means payment amount will be due 20 or 15 days later.

What is Actually a Sale Discount?

For most businesses, a promotional discount is normally expected for payments in advance. This kind of discount for early payment is named a sale discount (or called sale deduction), because of its purposes for raising the seller liquidity by lowering amount of money that associated with seller accounts receivable. Thus, an invoice with a sale discount will just look like "n/20, 3/10", which means purchasers can get a 30% sale promotion discount and also pay within a period of 20 days.

Despite the above advantages, you may notice that nowadays the amount of sale discounts have generally been dropping since (1) it is quite an expensive promotion costs for most sellers; and (2) even for customers they do not feel they are getting real bargains. These are the major disadvantages that make this marketing campaign not as popular as before. As a successful seller, you will have to overcome these disadvantages when you consider to offer any sale discount to your customers.

In fact, every marketing campaign has its own advantages as well as disadvantages. While offering sale discounts can really attract more customers to buy your products or services, you must control the overall promotion costs carefully and also occasionally provide real bargains to your customers in order to make this marketing campaign a true success.