Volume Rebates - Definition & Meaning
What is Volume Rebates?
Volume rebates are discounts given on bulk purchase or sale of goods and commodities to a consumer. For instance, a seller may give a 1% discount on every product that the consumer buys if he/she considers to buy a whole lot or in bulk. Such a strategy is used by the sellers when they want to clear their stock or if they feel that their stock is not being sold. They may also resort to such methods when the sales of a particular commodity is laggard. Volume rebates usually entice a customer to purchase in bulk amount and store it for the future.
Consider the case of soaps which are durable for quite a reasonable period of time. A consumer who wants to buy a soap may consider buying in bulk if he/she gets rebate on buying in bulk. That is why sometimes the soap companies give out products for certain discount. Like in case of soap if a soap costs Rs.10, then on buying 4 soaps the seller may give an Rs.5 discount. In these cases, the sellers gives out on the profit margin which he/she is likely to make on the sale of 4 soaps.
The advantages of volume rebates are many if it turns out to be successful. A volume rebate can be given by the retailer or by the company itself. If given by the retailer, he/she lets go a certain part of his/her profits. If given by the company, it lets its part of the profits go. However, in such scenarios people end up buying products more which covers up the reduction in profits because of low prices. Also, sales because of volume rebates helps decrease the inventory of the company or the retailer. Thus, reduces the cost.
Hence, this concludes the definition of Volume Rebates along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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