What MSRP really means....

[Grant Lamontagne]

I figured I'd put this out there so the folks who have no retail or marketing knowledge can understand what it's all about.  We all know that you never pay MSRP for things, but not everyone knows why.  In fact, I used to work for a guy (idiot) who bought the store I was managing who didn't understand it either.  He came in one day complaining that none of the product on the shelves was at MSRP, and if it was meant to sell for less, why would the manufacturer suggest that price?

Well, Neal, you idiot, wherever you are, this is for you.

MSRP stands for Manufacturer's Suggested Retail Price, also known as the "list price" and tends to be a little higher than what the product is actually worth.  This way, the manufacturer makes it look like the product in question is more valuable to the customer.  They understand that no retailer is actually going to try and sell a tool at this price, so while they try to be kind of realistic, it's basically just a meaningless number.

The retailer at the other end knows this, and usually purchases the item at around 50% of the MSRP- don't take this as a gospel when buying things as the markup changes depending on the product, manufacturer, geography etc, but that's generally what it works out to.  The retailer then factors in the costs involved in maintaining their store (brick & mortar or online/mail order) and adds what they feel is an appropriate mark up that covers their costs and an acceptable level of profit.

Pretty simple right? 

So far it is, but as with anything else, there's more.  The manufacturer, who also offered this overinflated suggested price now has to monitor the retailers to make certain that the product's value is maintained, even though they know full well that dealers are not selling for anywhere near what MSRP is.  So, they have minimum advertised prices as well, meaning that a dealer/retailer cannot advertise a sale price below a certain price.  If they do, the manufacturer can refuse to supply the dealer in the future, and this is why you often see things like "call for price info" since the dealer can sell for less, they just can't advertise lower prices.

A quick recap:

MSRP= $100
Dealer Cost= $50
Actual Price= $75
Minimum Price= $65

Any questions? 

Def

[cliosguy]

"call for price info" that one i didnt know, thanks boss

[Pacu]

I hate it when i go to out to eat and they put MSRP in my food. 

[Grant Lamontagne]

No problem.  There are some exceptions to those rules though- Victorinox for example doesn't allow retailers to publish prices on Victorinox watches in hopes of discouraging fakes.  If it's got a price listed, it's probably not real, or the dealer is not an authorized Victorinox watch dealer.

So don't assume that these are hard and fast rules- it's just to give everyone a better understanding of how the retail game is played so they can make their own informed decisions.

Def

[appletree_man]

I saw an online store here which must sell at RRP (the UK version of MSRP). A Sqiurt for £45    surely the RRP can't be higher than that ?

http://www.leathermans.co.uk/Leatherman-S4.html

[Grant Lamontagne]

Maybe Neal owns that store too.... 

BTW, just to make sure everyone knows this too, the Neal I am referring to is not NKB, or any other member of this forum! 

My guess about that shop is that they are either selling at, or above RRP either because they don't know this stuff (some retailers don't and sell higher than MSRP/RRP) or that they have other cost factors that mean they have to sell at that price.  It really is up to the dealers what they sell it at.

Some look at it as a way to make the customer happy ("Hey, I just got a hundred dollar item for only $70- I am a really cool wheeler-dealer!") while others use it as a starting point for pricing ("Well yeah, I paid a hundred and twenty for a hundred dollar item, but that's not bad when you consider the shipping/taxes etc").  Car dealers and airlines are notorious for the latter mentality.   

Def

[jzmtl]

Quite a few manufacturers try to enforce MSRP thou, Surefire for example. They can't legally do it so they "strongly encourage" their dealers with other methods like threaten to cut off their supply etc.

[Grant Lamontagne]

Yup, lots of people just don't "get it" which is why I thought I'd start this thread....

Def

[jzmtl]

Oh I'm sure SF gets it, but since they can get away doing it, why not. 

[Grant Lamontagne]

Ve haff vays uff makink you pay....

Def

[Medic82]

Thanks Def.

I have been wondering for a while what all the talk about MSRP was.

[nuphoria]

I thought it was a bug you caught in hospitals 

[I'm Still Bison]

I know of one or two gun shops in my area that seem like they take MSRP,as a base price and go up from there.I only know I've never seen many bargains in them.

[Poncho65]

Thanks for the low down Boss

[RaptorMan]

I usually tell people MSRP that way if its cheaper they are happy. I dont a store or anything....

[Whoey]

and here I thought it had to do with saturated fats...

[Sea Monster]

Yup, lots of people just don't "get it" which is why I thought I'd start this thread...

In addition to buying & selling things, and thus knowing how to haggle (even over small purchases. The trick, essentially is to lie. When that doesn't work, beg, borrow, steal, bully or blackmail), I've also been involved with Manufacturing and Importing things.

In both case the MSRP (or in Aus, "RRP") Basically depends on my mood when I write the price list valid for that quarter!


If you see an MSRP that is far in excess of the products actual (or "street" value), some dude in an office probably just didn't have his coffee made right one morning!

The retailer at the other end knows this, and usually purchases the item at around 50% of the MSRP- don't take this as a gospel when buying things as the markup changes depending on the product, manufacturer, geography etc, but that's generally what it works out to.  The retailer then factors in the costs involved in maintaining their store (brick & mortar or online/mail order) and adds what they feel is an appropriate mark up that covers their costs and an acceptable level of profit.

Some  stores have a price list, showing MSRPs, What you can generally actually sell it for (some are honest enough to know that no one pays MSRP), how much they pay for it, and therefore they're profit margin. -- I've had very stupid clerks SHOW ME THIS PRICE LIST when I'm shopping.

This is a fantastic game, because you know exactly what they're making, and can offer them their cost, plus a dollar, and see if they'll take it.

[Neil]

On a lot of stuff in the UK it doesn't quite work like that.  Most bricks and mortar shops for instance sell SAKs at RRP (recommended retail price) and unless you're lucky you have to go online to get anything lower.  As for Leatherman  there's very little fluctuation even online as the distributor sets the (daylight robbery) price and comes down hard on those who don't abide by it. 

On most consumer items the shop price is the RRP and the majority of shops view haggling as a strange foreign custom that they don't want to be getting into thank you.

[Biru]

It's also worth noting that the actual price the retailer pays for an item may not be 50% of the MSRP. In the musical products filed, sheet music and pre-recorded music generally costs the dealer 60% of MSRP. We carried a brand of electronic equipment which was hard to get, great to use and cost us 70% of MSRP! Our owner didn't even like us to order that brand because it made dealing difficult after shipping costs were added. Plus, when musicians did order a piece from that company, they thought we were trying to rip them off because we could only discount about 10 to 15 percent MAX.
We also used to carry Karaoke music. Some of the karaoke music had minimum sale prices which were basically MSRP. A dealer caught selling below this price would lose their ability to sell that product.

I worked a few Christmases for some local retailers, and I got to use their merchandise scanners for stocking duty. I took particular interest in the multitools, and noticed an odd thing. It might have been window dressing for the employees, but the dealer cost was usually half the shelf price, and not half the MSRP! I wondered whether the cost displayed was actually the cost, or simply a number derived to allow us to maipulate the stock.

[appletree_man]

On most consumer items the shop price is the RRP and the majority of shops view haggling as a strange foreign custom that they don't want to be getting into thank you.

Indeed, and the sad truth is most British folk are exactly the same   
My brother in law is an example of the way it should be, he haggles everything, even in big name stores. Not surprisingly he is not originally from these shores.

[american lockpicker]

I've tried it before and it works in some shops.

[Nikos]

Oooh I SO love haggling!

[Neil]

Back in the days of dual income and no kids I would occasionally wander across town on a lunch break and peruse the gizmos and gadgets in the local electrical stores.

Should I be tempted I'd go in and barter over the price.  Sometimes the sales assistant would be up for it but most of the time they looked at me as if I had three heads   The haggle just isn't something that is done much over here. 

[jzmtl]

It's also worth noting that the actual price the retailer pays for an item may not be 50% of the MSRP.

I think dealer cost will also depends on how far down the food chain the dealer is. Large high volume dealer may be able to sell stuff cheaper than small dealer's cost, at least that's my experience.

[Craig]

Back in the days of dual income and no kids I would occasionally wander across town on a lunch break and peruse the gizmos and gadgets in the local electrical stores.

Should I be tempted I'd go in and barter over the price.  Sometimes the sales assistant would be up for it but most of the time they looked at me as if I had three heads   The haggle just isn't something that is done much over here. 

That might be part of the reason we get charged so much . I hardly bother looking at the prices of tools in the big UK shops, even when the pound is strong - which it certainly isn't at the moment.

[WhichDawg]

interesting stuff

this world economy has been bad and good, if your buying the prices have been great!~
I just bought a 190.00 (MSR) coffee machine for 89.00 and I've been watching it's price
for 10 years! last Feb I seen it for 135.00 (usd) and thought it was a great deal,
I'm sooo glad I waited!

I hear Islands are going for less than half what they were a year ago!
now if we could just explain all this to Leatherman

[Springs420]

Thanks for the info on the call for price. I just thought they did that so they could sink their hooks into you!

[Grant Lamontagne]

Since I was just talking about this in another thread I thought I'd kick this one back up. 

Def