How to Set MRP of Product in E-Commerce?

Technical Terms to not be Translated -

Marketing Mix, Price,

________________________________________________________________Hello friends, welcome once again in this special training program where we are learning ‘How to Sell Effectively on E-Commerce’.

In this step by step learning process, we are going to learn how you too can join your business with the E-Commerce world.

Let’s begin our next topic.

Previously, we learnt “how to set the MRP of an E-Commerce Product”.

We saw how to calculate Manufacturing Cost along with many examples, we got to know how important Manufacturing Cost is.

Yes, friends !

In the Marketing Mix, we have seen in previous lectures that Price is an essential part.

Price plays a very important role.

Yes! Price plays a very important role whenever you are in a market, in a mall, or even online, price is very important.

Price is the only attraction point for the customers.

And we are going to understand today, how you can mould the price and how you too can portray your price properly to grow your business.

That is what we are going to learn in this special training program.

Let’s begin..

So you would have seen on many E-Commerce Platforms that when you look for a product, such as this mobile phone which I’ve taken as an example.

Whenever you click on the ‘i’, there is an icon of ‘i’, whenever you see the price, you will see the selling price, MRP price, Special Price, some % discount, 50% discount, 60% discount, 15% discount, and many different types of discount.

Now let’s understand what are the roles of these prices & how you can keep the MRP, Special Price, Selling Price on your E-Commerce site.

Let’s start with MRP.

MRP means “Maximum Retail Price”.

Whenever you are buying a product from the market, you can see MRP on the back side of the product.

When you go to buy a product online as well & when it is delivered at your house, then also MRP is set on that.

MRP is a price.

We are going to see what MRP is & how to set it.

We will discuss it here..

Maximum Retail Price. In the previous topic, when I told you about Retail & Supply chain, how the manufacturer sells his product to the wholesaler & then the wholesaler sells it to the retailer & at last from retail, it reaches the customer.

MRP says what the Maximum Retail Price should be & it is written on the product only.

‘The Retail Price that a Manufacturer recommends for selling their product’.

Manufacturer means the people who have made this product.

They have said that this product’s maximum value should be this much only.

If any customer wants to buy it, this is the best and maximum value for the purchase.

Let’s move forward.

One question might arise in your mind as to who sets the MRP?

I’d like to give you an answer & you can search it on Google or ask an authority also.

‘Govt. of India sets MRP for medicines’ all the products related to medicines, whether it is online or offline, the MRP of all products is set by the Govt. of India.

But all the other products except that in the world and in India,

Okay, let’s talk about India first.

In India, if you are making any product,Only the manufacturer sets the MRP That is, Maximum Retail Price.

This is something very important for you to know, who exactly sets the MRP.

We have heard a lot about MRP but, can I myself set the MRP in my business?

Be informative guys!

If you belong to the Medicine Sector, then you will need to get it approved by the Govt. of India.

But if you belong in some other sector and not the medicine sector, If you are selling fruit, selling electronic gadgets or even groceries, or anything else, the manufacturer sets the price.

The person producing it, manufacturing it using the raw materials, that person only sets the MRP.

-6:06

Now moving forward, “is MRP good or bad?”(repeat)

To answer that, I’d like to give you an example.

Suppose you are in a village, okay?

You have moved from the city to a village and you go to the nearest shop to buy Pepsi, Coca Cola or any other soft drink.

You find that the Pepsi or Cola that you bought for Rs. 10 in the city is being sold for Rs. 15 here.

Yes! It is being sold at Rs. 15 here. Why did that happen?

You would have thought that MRP is fixed so anyone will sell at that price only, not more, not less.

Why is the village shop selling the Rs. 10 Pepsi or Coca Cola for Rs. 15?

To understand.. the main reason, you need to understand the transportation that took place.

When you understand the Supply Chain in the right way, “Raw Material, Supplier, Manufacturer, Distributor, Retailer & Consumer”.

Now think, when the village retailer purchases the products from the manufacturer or the distributor, what will be the transportation expense.

Along with the transportation, what will be the maintenance expense?

Just think for 1 minute according to that.

Here we have taken an example of pepsi or coldrinks.

Now, to maintain that a refrigerator is required. For the refrigerator electricity is required and to maintain that the extra cost is required.

Now, after purchasing from the manufacturer and wholesaler, am I actually gaining any profit?

If not, then why should I sell it on MRP?

This question will obviously arise in the mind of the village retailer. Yes, this is wrong. This should not happen and even the government takes strict action against such cases. Well yes, if the retailer is caught, the government will definitely take action.

My duty is to make you understand if the MRP is good or bad. There are chances that sometimes you might feel that you are not gaining any profit and when it actually happens, please just try to understand and try to calculate the expense for the manufacturing and transportation. After calculating that, you will be able to understand if you are gaining any profit in true sense.

Look. After completing this training programme or after launching your business on E-Commerce. At the end of the day, being a businessman, what will I want? Did I gain any profit or not? Is that important for me or not?

Well, there are many ideas that come into action on E-commerce, but after a few months, they shut down.

Have you ever thought about why this happens?

Look, I am not trying to demotivate you, but you should know the reality..

People come on E-commerce for 6 months to 1 year and then they leave. They don’t understand and know how to maintain the “manufacturing cost, business cost, and fixed cost”. Also, How to double the profit? Okay. Well, this training programme is designed to understand that only. I am not at all hoping to demotivate you, I am trying to motivate you but, you should understand the basics of how we can increase the profit by managing our cost. Well then, you will also be able to sell effectively  on E-Commerce and you might also become amongst those selected people that are ruling on E-commerce. Yes friends, “just think about the transportation and the maintenance cost”.

10:42

“Is MRP good or bad”? Sometimes we wonder if MRP is good or bad. It may happen that sometimes you will see, the transportation cost might have increased and because of that you are gaining less profit, at that time it might be bad. But, MRP is good.

For whom? For the consumers. Yes, the consumer should properly understand and know the cost of each product. Suppose some product is of 10 thousand or 20 thousand, we can simply check the MRP and know the cost of the product ,that yes ! The price of this product is 10 or 20 thousand.. right!

Now, sometimes the customer might wonder that the business owner or the business house or the wholesaler or retailer has sold a product of 10 thousand in 9 thousand only, so did they benefit? Well yes, obviously he is selling because he is benefitted. Sometimes, when there is no benefit, they lower the price or make some adjustments in the product and sell it. This is a bad practice and it should not happen. You might get caught someday.

Now, let’s get back to the example. Is this good or bad? If you cannot bear the transportation and maintenance cost, it’s not a good thing. But if the transportation and maintenance are good like in electronics. Take an example of electronics. If you purchase any electronic gadget or an item on the MRP, the business is definitely benefited. But when you purchase it with some discount, the business is still benefitted. Well, in today’s modern world, the most profitable category is the electronics market. Yes, in the electronics market, there are many ways to gain profit. The profit ratio is more in the electronics market because here, the price changes a lot for the electronic items during the transportation from the wholesaler to the retailer and then from the retailer to the customer. And due to the difference in price, the retailer gains more profits. So, sometimes the MRP is good and sometimes it has a bad impact on the business as well. Don’t worry. You just have to calculate the transportation and maintenance cost and in true real sense you can do very good in your business.

So come, let's go to the next slide. As I said earlier, if you understand the supply chain and manage to maintain the price, then you will be able to truly understand the value of MRP and sell the right product to the consumer.

Believe me when I say, if you maintain a good relationship with the consumer, they will never leave you.

Now let’s move forward. “Is GST included in the MRP?” This is a question and also a doubt. My answer is yes, GST is already included in the MRP. Well, what happens is, many times when you go to a restaurant or anywhere else, you might have noticed that the owner is charging us the GST on the MRP separately. Well as i said, it happens in the villages but many times the owner charges extra GST on the MRP in cities as well.

I talked with many chartered accountants and asked if this is correct or not? They all replied with a very good answer. I would like to answer you with an example. Suppose you bought a chocolate worth 100 rupees from the market. Any chocolate like dairy milk, 5 star or anyone that you like. I like 5 star. So consider that you have bought a few chocolates worth 100 rupees. Now, consider that 5% GST is added on the chocolate that you bought worth 100 rupees, where 5% GST is included. This means that the actual cost of the chocolate is 95 rupees. Yes, 95 rupees plus 5% extra that is 5 rupees. So the total value is 95 plus 5 that is 100.

So all the taxes including the GST are included in the MRP. That’s what the name suggests MRP- Maximum Retail Price. So, all taxes and GST are included in the MRP. Many people have this doubt. I hope you got the answer and it is clear now.

Let’s move forward to the next slide.

 15:34

Now, I gave you an example previously that is “manufacturing cost example”. Suppose we are making “50 computers”, the “direct material cost will be 1 lac”, the “direct labour cost will be 50K” and the “manufacturing overhead will be 50K”, so the “total cost” would be 2 lac. Okay. So I will sell 50 computers for 2 lac. Well, what MRP should I set? Now this question arises. I am a manufacturer and I have made 50 computers in 2 lacs. How should I maintain the MRP cost with the manufacturing cost? And what cost might be sensible? So when you are a manufacturer, you will have to get all the approvals for the costing and mention all the details like you have paid this much GST and you have paid so and so for the taxes. At last the overall costing for the product that the consumer has to pay for.

So if you want to know more about MRP, there are many government websites where you can get more details. After this we will understand about the selling cost. But first, try to understand this example..

This is just an example. Now, will you sell the product for 5 lac or 10 lac that cost you only 2 lacs? What should be the actual selling cost of the product?

Friends !

Will you charge extra above the MRP?

 Now, this is also a doubt. Well the answer is, there are many acts like “the consumer goods act 2006” and many others that work on consumer protection, which clearly states that you cannot charge any kind of extra costs from the customers, you have to state the MRP clearly, you can advertise but according to the proper rules and norms.

If you distract the consumer in any way either by misguiding through the MRP or the advertisement  or by providing insufficient or false information regarding the product, then the consumer has a way to beat you in legal terms. They can file a case against you in the consumer forum and there are many other actions that can be taken legally. This can go totally against you.

Therefore, it is my request to you all to visit this website- “consumer affairs dot NIC dot in”. If you are a citizen of India and doing business in India, then please do visit the site of “Department of Consumer Affairs” where you can gain more knowledge about the MRP.

You can also get the information on how to maintain the MRP cost plus product’s cost plus the selling cost. You will also get all the information by which you can avoid violating the government’s policies.

Well, you will get much more information and knowledge about the consumer act and the protection act as well as all the other acts. Okay. So this session was related to the MRP.

Well Friends, it is not possible that I will have all the answers but if you still have any doubts or questions, you can ask us on “forums.learnvern.com”, where our team is available online 24/7 to answer your questions and clear your doubts.

(19:19-19:34 end music).