On Friday 10 Aug 2007 5:42 pm, Deepa Mohan wrote: > I have > several small shops here that sell at MRP, and equally, several > "buy'n'save" (that is the generic term) shops which sell below MRP. I > am not able to find a factor which will explain what makes the shop > follow one particular path.
The MRP is set to account for the need to transport the item to faraway places, which involves more middlemen who will take a cut . If the item is easily available nearby, there is no need to price it at MRP. If a seller prices his product at MRP his business will be undercut by the next shop selling 5% under MRP, who in turn will be undercut by the next seller selling 5% below that. Ultimately the pricing will be the least that the market can create while keeping volumes high and profits healthy. A computer peripheral that is sold at an MRP of Rs 1500 in the swanky high street shop is sold in SP road at Rs 1,200 even while it carries the MRP=Rs 1500 sticker. The SP road guy in turn is making at least 20% - i.e he is getting it from a dealer for Rs 950. The dealer too is making 20% - and probably gets the item wholesale from the manufacturer at Rs 750 or so. The manufacturer too probably takes 20% (or more) and it may cost him Rs 500 to produce the item. > > I once had a run-in at the Brigade Road Nilgiris which had stickers > (for a higher price) over the printed MRP. I told them that what they > were doing was illegal. I was told not to make a fuss and was given a > 20% discount on that day's bill, You were bribed by Nilgiris not to complain about an illegal act. shiv
