What is Volume discount?

Volume discounts can cut your cost of goods sold, but only if you actually sell the extra stock before it ties up too much cash or goes stale. A discount on 500 units is not a deal if you only sell 50 a month and the rest sits on a shelf.

Compare the unit savings against the extra holding cost and the time it takes to sell through the larger order. If the discount saves a little but doubles your stock cover, it is usually not worth it for a small store with limited cash.

Formula

Example

A candle supplier sells jars at $4 each for orders under 200 units, and $3.50 each for orders of 200 or more. A store that normally orders 100 units a month is offered the 200-unit price. Buying 200 saves $0.50 per unit, or $100 total, but ties up $700 in stock instead of $400, and doubles the time to sell through.

Common mistakes

• Buying the larger quantity for the discount without checking how long it will take to sell.
• Ignoring the extra holding cost that comes with carrying more stock.
• Comparing only unit price and not total cash tied up.

Volume discount and SteadyShelf

SteadyShelf's quantity suggestions are based on forecasted demand and case packs, so you can check whether a volume discount tier actually matches how fast a SKU sells before committing to the larger order.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Price breaks · Minimum order quantity · Case pack · Unit cost · Carrying cost

Full inventory glossary

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