Question

A drug store was going to open on the corner of a busy street downtown in the next three months. Before it opened its doors it needed to secure merchandise to sell to customers. It determined that it would need to stock its shelves with toiletries on a regular basis. The store had the storage capacity to hold excess inventory. When the drug store approaches a company that supplies toiletries, which type of discount would be a fitting discount for the store to use?

Answer 1

Let's have a look at the following points to arrive at the best discount solution(fitting) for the present scenario:

• The most appropriate discount in this scenario is the Quantity Discount, which is defined as the discount which the seller provide to the buyer in case of bulk purchasing.
• In the present scenarios, we see that the buyer i.e the drug store is willing to purchase huge quantities of toilet paper from the seller and also has shelves to stock the excess inventory.
• The buyer should seek quantity discount from the seller as the large scale buying will enable economies of scale fro the seller thus reducing their unit cost per produced toilet paper.
• Another advantage in this or the seller is the huge bulk quantities can be shipped at once thus reducing the overall cost and they can use a portion of these savings to offer discounts to the buyer i.e the drug store.
• The quantity discount can be given for volume purchases or on a single basis.