MR(i)P

Warren Buffet had famously quoted “Price is what you pay and value is what you get”.

In India, Maximum Retail Price (MRP) is mentioned on every packaged commodity purchased by consumers. This price is the manufacturer calculated price.

We, consumers, liberally shower appreciation on Flipkart, Amazon and other e-commerce sellers for providing hefty discounted price to MRP.

So there is an uncertainty over holiness of MRP.

A recent article appeared in New York Times by David Streitfeld (3^rd July 2016) titled “Amazon Is Quietly Eliminating List prices” (Economic times - 5^th July 2016). I will replicate here one section of the article:

“The problem with list prices or, as they are sometimes called, manufacturers’ suggested retail prices, is that they are regularly more of a marketing concept than what anyone is actually charging. When Amazon was saying the list price of the Breville Infuser was $800, Breville itself was selling the machine for $500 — about the same as Amazon. Other retailers sell it for $500, too. Breville confirmed the price was $500.”

Reflecting on MRP after understanding the above article generates few questions:

• If sold at heavy discounts why MRP is required?
• Is benchmarking the offered price with MRP to understand discount, is an incorrect method?
•  Can MRP be discontinued (what are the implications)?
• Were manufacturers unfair to customers by continuing to adopt pricing mechanism conceptualized in pre-technology times?
•  Is e-commerce sites are re-defining fair price in market?

I wonder whether dynamic pricing like airline tickets will be introduced to products. Today majority of the airline tickets are booked online and no one is aware about MRP. Agreed MRP is only for packaged commodities and not for Services, Space selling etc.

I think super markets like Big Bazaar, West side, D-Mart should incorporate dynamic pricing for products in their software. The prices should arrive based on procurement price plus demand, carrying cost of the product, cash flow requirement etc.

It’s time to move forward from MRP.

For further reading please refer article written by Anupam Manur – “Time to abolish the MRP” (The Hindu – July 23, 2015).