Selling goods at Maximum Retail Price (MRP) justifiable?
Almost all goods are sold at MRP. The rules are governed by different legal and tax laws. The excise rules require MRP to be put on all goods and have rules in case the MRP is altered.
Do you think the system of MRP is perfect for any economy?
Advantages of MRP system are:
- Prices are fixed and retailers can not charge the extra
- Customers are aware of their purchasing power, if the MRP is not fixed than purchase power is not certain till the product is bought
- Prices can be regualted
- Tax can be levied on the fixed price etc.
The main Dis-advantage of MRP system is
The MRP is fixed after calculating the average cost of transportation of products. Suppose, a product is manufactured in South India, the product can be sold at lower cost in south India but same product should be sold at higher value in North India due to transportation costs.
But currently goods are sold at same rate by distributing the whole transportation cost and averaging it.
The cold drinks are sold at same price in whole India, but manufacturing and transportation cost vary in each state and village.
Dont you think just like Maximum Retail Price, even the minimum should be fixed. The benefit of minimum retail price can be that tax loss is less (VAT is on the sale value).
Its seen in most of the E-Commerce website that MRP is high but the selling price is highly discounted.
for, example on Flipkart the items are marked with discounts. If the consumer is aware of minimum prices also, he can buy from the store selling items at minimum price.
Setting a minimum price looks illogical. Suppose you run a store and want to close the store forever.
you have closing stock, which you want to sell at any cost. If minimum price is fixed you can not sale your store items at a rate below Minimum rate. It become very difficult to sale the items.
Maximum retail price can be supported due to advatanges of fixing taxes, regulating the niche, distribution of cost etc.
Also if we fix the minimum rates, the store will not compete with each other and one nearest to your home will be winner. Where is the competition in this case, without competition innovation will die.