What does Manufacturer’s Suggested Retail Price (MSRP) mean?
The price that manufacturers recommend to their retailers to sell a certain product. You will often find the MSRP clearly displayed on products that you find in stores, on both small disposable as well as large items. The MSRP is also known as the list price, sticker price, recommended retail price (RRP), or the suggested retail price (SRP).
When buying items online via eCommerce stores, you will also find that the MSRP is available. The displaying of the MSRP allows for the fair trading of goods, although the retailer is not obliged to sell the products at the suggested retail price if he does not wish to. An example of where you will find a mark upon the MSRP is in late-night convenience stores that are open twenty-four hours a day. It is also possible for the retailer to sell items below the MSRP if they are trying to get slow moving inventory off the shelves.
One industry that relies heavily on the MSRP is the automotive industry. By law the MSRP must be clearly displayed on new automobiles for sale, and this number is usually the starting point for negotiations, although it is becoming more common for car dealers to immediately mark down the MSRP on certain models, either to move inventory, or as a loss leader to get people into the showroom.
While MSRP is a legal necessity in the automotive industry, any retail product can have an MSRP attached to it. It is most commonly seen with higher priced goods though, so appliances and electronics are another area where MSRPs are common. Since the manufacturer sets the MSRP it is expectedthat it remains constant across all retail channels. The MSRP is set based on all the costs incurred during the manufacture, distribution and sale of a product, and it also takes into account the normal and fair retail markup. The MSRP is set to keep the price attractive to consumers, while allowing all the parties involved in the manufacture, distribution and sale of the product to make a profit.
It’s not unusual to see a retailer charging less than the MSRP for a product. These discounts are usually dependent on the wholesale cost of the item, but could also simply be so that the retailer can get rid of the item and make room for a new model or different product. There are also cases where the MSRP is set unreasonably high, allowing retailers to advertise the product at a significant discount, making customers feel as if they are getting a far better deal than they really are.