Suggested retail price
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The Suggested Retail Price (SRP) sometimes called Manufacturer's Suggested Retail Price (MSRP) or Recommended retail price (RRP) of a product is the price the manufacturer recommends that the retailer sell it for. This helps to standardize prices among locations. While some stores always sell at below the suggested retail price, others do so only when items are on sale or clearance.
Suggested prices fly in the face of Competition Theory, as it allows prices to be set higher than would otherwise be the case, so robbing the consumer.
SRP is therefore usually only allowed in markets where special circumstances justify it. For example, Chemist and Newsagent might be allow SRP, so that they can afford to spread out and serve small communtites.
Much of the time, stores charge less than the suggested retail price, however this depends upon the actual wholesale cost of each item, usually purchased in bulk from the manufacturer, or in smaller quantities through a distributor.
SRP in the United States
Manipulation of retail price is common in the U.S., where companies often inflate these numbers, then give greater supposed "discounts" to create false value. This is especially common at retail chains which act as their own distributors and outsource manufacturing, thereby allowing them to set their own retail prices.
Under earlier U.S. state "Fair Trade" statutes, the manufacturer was able to impose a fixed price for items. These fixed prices could offer some price protection to small merchants in competition against larger retail organizations. These were determined to be in restraint of free trade. However some manufacturers have adapted MSRP - a price at which the item is expected to sell. This may be unrealistically high, which opens the market to "deep discounters", able to sell products substantially below the MSRP. Recent trends have been for manufactures to set the MSRP closer to the "street price" — the price at which items actually sell in a free market.
A common use is due to statutory requirements regarding automobile sales in the United States. Prior to this there were no defined prices, and dealers were able to impose arbitrary markups, often with prices adjusted to what the salesperson thought that the prospective purchaser would be willing to pay. Currently "sticker price" includes a substantial markup so high that dealers will often be willing to reduce this margin, while for new and popular cars the dealers will often impose additional charges for high margin dealer items such as interior floor mats, striping, and the like and even sometimes "dealer preparation". Regardless of these up and down adjustments, MSRP gives the consumer a starting point for negotiation.
See also
- Price
- RRP (Recommended retail price)
- Resale price maintenance