Trade allowances are monetary incentives from manufacturers to wholesalers or retailers to encourage them to stock, display, or promote specific products.
Main types include buying allowances (bulk purchase discounts), display allowances (payment for premium shelf space), and advertising allowances (co-op advertising support).
Trade allowances motivate channel partners and increase product visibility at retail. However, excessive allowances can erode profit margins. The key is balancing incentives with profitability to maintain healthy channel relationships.