What is MRP? (and how it relates to your selling price)
MRP is the maximum retail price printed on a pack, the ceiling you sell at or below, and your actual selling price is the number your customer really pays.
MRP stands for maximum retail price. On a packaged product, it is the highest price at which that item can be sold to the customer, and it is printed on the pack. Your selling price is what you actually charge. You can sell at the MRP or below it. The idea of the MRP is the ceiling.
Two numbers, two jobs
Think of a jar of jam with MRP Rs 250 printed on the label. That is the ceiling. You may list it at Rs 250. You may list it at Rs 225 during a festive offer. You should not list it at Rs 275, because that is above the maximum.
The selling price is the number that appears in your cart and on your payment screen. It is the number your profit depends on.
Where sellers get confused
- The MRP is not your cost. Your cost is what it took to make or buy the item.
- The MRP is not automatically your price. It is the upper limit.
- A discount is simply a selling price below the MRP. "Rs 250 now Rs 225" shows one number against the other.
- If you put a higher number on your label just so that a discount looks bigger, you are on shaky ground. Think about honesty first, and read avoiding exaggerated claims in product descriptions.
A short example with your numbers
Say you make a face balm that costs you Rs 90 to produce and pack. You print MRP Rs 299 on the box. You sell it on your store at Rs 249.
- MRP: Rs 299
- Selling price: Rs 249
- Cost: Rs 90
- Left over before shipping, fees and ads: Rs 159
The customer sees a saving of Rs 50 against the MRP. You still keep Rs 159 on the product. If you were to sell at the full MRP, you would keep Rs 209. The MRP gave you room to choose.
Working out your selling price
Do not start from the MRP. Start from your cost and the margin you need, then check the result against the MRP you intend to print. Price from target margin formula walks through it. If your price comes out above the MRP you planned, change one of the two before you print anything.
What about rules?
There are legal metrology rules about what must be printed on packaged goods and how the MRP may be used. I am not going to summarise them, because they change and depend on your product category. Check the official legal metrology source for your state, or ask a professional, before you print labels.
Tax-inclusive or not
MRP is generally understood as a price the customer pays, which is a point to clarify with your CA when you set your numbers. For the concept, see tax-inclusive vs exclusive price concept.
On your store
When you add a product in the Varchas admin, you enter the price the shopper pays. Check how the product editor fields appear for your own account to see what is available. Whatever you enter, make sure it is at or below the MRP on your pack.
Next step
Take three products. Write down MRP, selling price and cost side by side. If any selling price sits above the MRP, fix it today.