How chain (trade) discounts work
Distributors and wholesalers often stack discounts: a trade discount, a volume discount and a prompt-payment discount. Each one applies to the price after the previous discount.
| Step | Calculation | Net price |
|---|---|---|
| List price | — | 1,000.00 |
| 10% trade discount | 1,000 × 0.90 | 900.00 |
| 5% prompt-payment discount | 900 × 0.95 | 855.00 |
| Equivalent discount | 1 − (0.90 × 0.95) | 14.5% |
The equivalent discount is 1 − (1 − first discount) × (1 − second discount) × …
Check your margin before discounting
A discount comes straight out of your margin. On a product sold at a 25% margin, a 10% discount removes 40% of the unit profit. Set your discount limit with the profit margin calculator first.
The reverse calculation gives the discount rate when you know the list and net prices, useful for comparing supplier price lists.
Frequently asked questions
What is 10% plus 5% discount?
It equals a 14.5% total discount, because the second discount applies to the already reduced price: 1 − (0.90 × 0.95) = 0.145.
Is the discount applied before or after VAT?
Discounts apply to the price before tax, and tax is calculated on the discounted amount.
How do I find the discount percentage from two prices?
Discount rate = 1 − (net price ÷ list price). A list price of 1,000 and a net price of 855 means a 14.5% discount.
Does the order of discounts matter?
Not for percentage discounts: 10% then 5% gives the same result as 5% then 10%. It does matter if a fixed-amount discount is mixed in.
Last updated: 31 October 2026 · By the Offerneta team