NEW DELHI: The Maharashtra government’s recent order asking multiplexes to not overcharge food and beverages was much lauded and it came from a common belief that the Maximum Retail Price (MRP) amount is de facto price, thereby benefitting consumers. The reality, however, is slightly different.
From multiplexes, airlines to sellers of consumer goods have found ways to infiltrate the systems to benefit themselves. Even though the MRP tag is mandatory to all the packaged goods and clearly states that the product cannot be sold beyond that price point, but in reality the practice is rarely followed. It is widely seen that sellers sell the product double the MRP value by merely convincing they are adding a ‘value’ to it. The value can be anything, from keeping the bottle of water cold to serving the packages food in a new avatar. The ‘value’ addition by its natures comes under the service category which does not fall under the purview of MRP system.
Another important flaw of the system affecting consumers is that manufactures are given the right to fix MRP as high as they want and it is totally up to consumers whether to accept the price or boycott it. However, it is rare that manufactures put a price tag so bizarre but they can surely keep the margin wide enough and bank on the popular belief that MRP is the fair price of the product.
People advocating consumer empowerment said that consumer should always contest the MRP and use his negotiation skill. To check the effectiveness of negotiation on the MRP tag, we walked through one of Delhi’s busiest electronic market at Nehru Place. At one shop, we showed interest in buying Samsung’s flagship smartphone Galaxy S9 (128 GB) which has an MRP of Rs 68,900. The seller’s quote for the article was Rs 65,000 and after a little negotiation it came down to Rs 63,000. A different shopkeeper was offering the same smartphone for Rs 62,000, which was still higher than its selling price at Amozon.in — Rs 55,900.
Similarly, Apple’s Macbook Air 128 GB has an MRP of Rs 77,200 but retailers were ready to give a discount of Rs 8,000-12,000 depending on the margin they work and buyer’s negotiation skill.
In case of Fast Moving Consumer Goods (FMCG), a number of retailers said the MRP is fair value but when it comes to articles that have longer durability and priced in triple digits, they work on margin. They explained that one kilogram of Horlicks can have multiple prices and retailers can easily give a discount of Rs 10 on it. Misra said that the message to consumers is that they should buy things in which they see equal value.
The system, however, doesn’t do much good to manufactures either. Arvind Singhal, chairman of Technopak said, “It is difficult for manufacturers to set a uniform price for a country like India. The rentals in Connaught Place are much higher than rentals in other parts of the country. Similarly, a television sold in Assam and in nearby centres where it is built, cannot have the same price. It impacts everyone.”
Singhal added that MRP is an age old system and should be replaced with recommended retail price (RRP) — a free market like system that is followed in developed nation where the manufacturer or wholesaler recommends what the retailer should charge for a product.