As online retail stores increasingly become the destination of choice for many consumers today, pricing strategies must be effectively managed across all channels to ensure fairness across the board. With retailers struggling to boost traffic to their online stores, many have adopted aggressive price points to attract their ideal consumers. This practice has led to lower average retail price points, largely affecting smaller businesses.
However, with the introduction of MAP (Minimum Advertised Price) and MRP (Minimum Resale Price) into the retail market, manufacturers can now ensure that all retail outlets – online and brick-and-mortar stores – maintain a specific minimum price point to promote fairness across all sales channels and gain more control over product pricing.
What is the Minimum Advertised Price?
Minimum Advertised Price (MAP) is the lowest price point at which a retailer advertises a product. Agreeing to work with the MAP pricing strategy does not necessarily mean that a retailer cannot sell a product for less than the minimum agreed price point; it simply means that it cannot be advertised for a price less than the minimum amount.
For instance, if Nike has a MAP price of $200 for one of its sneakers, you are not allowed to sell the product lower than $200, whether the advertisement is online or in print.
What is the Minimum Resale Price?
Minimum Resale Price (MRP) is a pricing policy set by manufacturers to ensure that retailers sell a product at a certain price, at or above a price point, at the point of sale. According to manufacturers, MRP policies have similar benefits as MAP and can be used to prevent loss leader selling.’ MRP is specifically designed to protect a product’s value against discounting to help brick-and-mortar outlets improve their profit margins.
Implementation and Enforcement of MAP and MRP
Before 2007 in the United States and 2009 in Canada, the implementation of MAP pricing strategy and MRP policies was considered illegal and anti-competitive. However, with amendments to Anti-Trust Laws in some states in the U.S. and the Competitions Act in Canada, manufacturers are now allowed to implement specific unilateral actions to enforce MAP and MRP policies. Manufacturers now have the legal right to punish retailers by either warning them or even restricting them from selling their products again.
Enforcing MAP and MRP to manage online retail prices has been a big issue for manufacturers, as some have been forced to cut off business ties with valuable retailers. However, for these policies to be enforceable, they must not have any third-party influence and must not be deemed to affect the market adversely. However, in the long run, MAP pricing strategy and MRP policy effectively create a balance among all resellers by ensuring fair competition and a level playing ground for all players in the retail industry.