Trade Schemes and Discounts: A Practical Guide for Wholesalers

Trade schemes are the offers a wholesaler or distributor gives retailers to push bigger orders, move slow stock or get paid sooner: free cartons, quantity-slab discounts, cash discounts and festival offers. A scheme works only when the extra volume or faster cash you get is worth more than the margin you give away, so every scheme needs a quick costing before you announce it.

Every kirana owner knows the pull of "ek carton pe ek packet free". It feels like a gift, but for the supplier it is a price cut in disguise. This guide explains the common types, how to cost them and how to keep them from turning into arguments at billing time.

The common types of trade schemes

Free goods (buy X, get Y)

"Buy 10 cartons, get 1 free" is the most familiar. The retailer sees extra stock; you see a discount equal to Y divided by (X + Y) of the goods value. For example, 1 free on 10 bought is about 9.1% off, not 10%.

Quantity or value slabs

Prices or discounts step up as the order grows. For example: orders above ₹10,000 get 1% off, above ₹25,000 get 2%. Slabs reward big baskets and are easy to understand.

Cash or early-payment discount

A small discount for paying within a few days instead of the full credit period. It speeds up your collection and reduces the working capital you tie up in dues.

Product-linked and festival offers

A combo of a fast mover with a slow mover, or a short-period offer before a festival. These are useful for clearing stock that is not moving, which our guide on dead stock in a kirana covers from the shop side.

Company schemes versus your own schemes

Often the manufacturer funds part of a scheme and passes it to you. Check what the company reimburses and how (credit note, free stock, claim) before you promise the same to your retailers. Your own schemes come entirely out of your margin.

How to cost a trade scheme

Before you announce anything, put numbers on paper.

1. Find the effective discount. Convert the scheme to a percentage of selling value. A free-goods offer, a slab discount and a cash discount can all be compared this way.
2. Subtract it from your margin. If your margin on a product is 6% and the scheme costs 3%, you are earning half. Our article on how to calculate distributor margin shows how to get the margin figure right.
3. Estimate the gain. How much extra volume do you expect? How many days sooner will you be paid?
4. Add the hidden costs. Extra delivery trips, extra storage and more credit exposure all count.
5. Set an end date. An open-ended scheme becomes the new normal price.

A simple sheet like this helps:

Item	Without scheme	With scheme
Monthly sales of the product	₹1,00,000	₹1,30,000 (expected)
Margin %	6%	3% after scheme
Margin earned	₹6,000	₹3,900

The numbers above are only an example, but they show the trap: 30% more sales can still mean less money in hand. The scheme is worth running only if volume rises enough, or if it clears stock that would otherwise be written off.

Designing schemes retailers actually understand

• Keep the rule to one sentence. "Order ₹25,000 or more in a week and get 2% off" works. A rule with four conditions does not.
• Match the scheme to a goal. Want to clear stock? Use a product-linked offer. Want faster payment? Use a cash discount. Want bigger baskets? Use slabs.
• Protect the credit side. A scheme that pushes a retailer past a safe credit limit hurts you later. See how to set a credit limit for retailers.
• Announce it in one place and in writing. Share the scheme with every retailer at the same time. Selective verbal schemes are the root of "mujhe toh aapne kuch aur bola tha".
• Show the benefit on the bill. If the discount is not visible on the invoice, the retailer will not remember it, and your accountant will not be able to reconcile it.

Accounting and tax: keep it general, keep it clean

How a discount is treated for GST depends on how and when it is given and on whether it is shown on the invoice. Rules differ between a discount given at the time of supply and one given later, so do not guess. Check with your CA before you start offering a new type of scheme, especially free goods and post-sale discounts. Whatever you choose, record each scheme clearly: what the offer was, the dates, the products and the retailers who got it.

Common mistakes with trade schemes

• Not counting free goods as a discount. The goods have a cost even when the retailer pays nothing.
• Running too many schemes at once. Retailers get confused and your staff bill them wrongly.
• Never ending a scheme. Retailers begin to order only when something is on offer.
• Giving the same scheme to a slow-paying shop. Reward the retailers who pay on time.
• Forgetting stock. A popular scheme can empty the shelf before the next delivery arrives.

How MaalMitra helps

MaalMitra does not calculate schemes for you, and we would rather say that plainly. What it does give you is the data and the clarity that make schemes easier to run:

• Catalogue and prices in one place. You manage your own products, prices and availability, and can update many items together with a CSV import, so a change is made once and every retailer sees it.
• Orders with real quantities. Because partial fulfilment and delivered quantities are recorded, you can see what actually moved during a scheme period.
• Discount and scheme label. Each product carries a per-product discount percentage, which reduces the taxable value on the invoice, and a "Scheme" text label that retailers see. The scheme calculations themselves stay manual.
• GST invoices. Invoices are numbered per financial year and show HSN and the tax split, which keeps your billing record tidy.
• Analytics. Sales trend, repeat rate, top and declining retailers and product demand help you judge whether a scheme brought new volume or just shifted existing orders.
• Khata and credit limits. Dues, overdue status and limits per retailer tell you who can safely take a bigger order.

Together, these let you compare the weeks before, during and after a scheme using the same records instead of memory.

The bottom line

A good scheme is a deliberate trade: you give up a little margin for volume, cash or cleared stock. Cost it first, keep the rule simple, put an end date on it and review the results. If a scheme cannot be explained in one sentence or measured afterwards, it is probably not ready.

Want your orders, dues and sales trends in one place so you can judge your next scheme with real numbers? Get started with MaalMitra and set up your wholesale catalogue today.