Today we are discussing how pricing calculation works for various parties involved in the supply and distribution chain How companies pass on the price to distributors and how retailers calculate selling price

Across the globe major companies Create Price lists of their products, (we will discuss in a separate blog on how to price a product) but for now lets assume the selling price is set by the manufacturing company . Now the price lists can vary as per different types of Retailers

How do retailers make money ? What is their profit margin ? The MRP of the chocolate bar is 110 And Retailer got it for 104.70 , so on every bar sold by the retailer he will get a profit of 5.30 rupees (before tax)

This is just a high level calculation and it has many variables using which companies can have better target prices

What is MRP ? and where it is applied ? MRP is Maximum Retailer Price, this is the max capped price of a product, the product cannot be sold beyond this price, Ex – Product – A chocolate bar 50gms – MRP is 110 So the chocolate bar can be sold at 110 or less but not at a higher price. The manufacturer of the product assigns this MRP and everybody down the supply chain follows this pricing. The government made MRP mandatory printed on the products so that best, fair and uniform pricing is applied everywhere. This helps protect end consumers from malpractises

Whereas, In many countries they have differential pricing, so the price of the product at which it will be sold to the end consumer is completely decided by the seller

Example – In the USA when we buy a bottle of water from a mall, it has a different price compared to the same brand of water bottle at a convenience store.

Hope you liked the blog, stay tuned for more such content

Francois