Reasons for Discount offer

Reasons for Discount offer

There are number of reasons for discount offer on the goods. Some important reason discussed below

1. Stock Clearance

Discount offer is very effective tool to clear off season stock. For example if the summer season is at end then company supplier would not want to ties up its funds into the off season stock.

2. Liquidity Problem

Business needs hard cash for the operations and if business is finding difficult to generate funds from the operation then business may opt for some discount to improve the liquidity.

3. Contribution

Discount offer can also improve the total contribution to cover the fixed asset. In businesses with low fixed cost the high turnover may improve the profitability. Therefore discount can play an important role to improve the profit of the organization.

4. Competition

Discount offer is some time is offered to compete in the market. If the competitor is offering discount in the market then entity has no option but to offer the discount to compete in the market.

5. Bulk Order

Discount is also offered to get bulk order. There are number of advantages attached to the bulk orders therefore entity prefer to get the bulk order instead of chasing too many customers.

6. Short Term Boost

Discount may be offered as promotional activity and to improve the market availability. The short term boost is required for many reasons i.e to counter competitor new launch, improve liquidity etc.

7. Low Quality

Discount is also offered on low quality product or faulty product. This type of discount is very famous in the garments and shoe industry.

8. Save Cost

Discount directly and indirectly saves many costs. For example it reduces the cost related to stock storage due to low quantity of stock is expected after discount offer in the market.