The document discusses various pricing strategies used by retailers, including: - Cost plus pricing which adds a profit margin to the cost price. - Manufacturer suggested retail pricing where retailers may sell at, below, or negotiate the suggested price. - Competitive, prestige, psychological, and multiple pricing strategies. It also defines wholesale pricing as the cost price plus a profit margin percentage, typically between 30-60%, and retail margin as the difference between retail and cost prices divided by the retail price.

1. Pricing and taxation

2. • Cost plus pricing works on the following principle:
Cost Price of the product + Profit (Decided by the retailer) = Final price of the
merchandise.

3. Manufacturer Suggested Retail Price (Also called List Price or Recommended
retail price)
• Condition 1
§The retailer sells the product at the same price as suggested by the manufacturer.
• Condition 2
§The retailer sells the merchandise at a price less than what was suggested by the
manufacturer - Such a condition arises when the retailer offers “Sale” on his
merchandise.
• Condition 3
§Retailers initially quote an unreasonably high price and then reduce the price on the
customer’s request to make him realize that a favour has been done to him. A
condition of Bargain - where the customer negotiates with the retailer to reduce the
price of the merchandise.

4. Strategies
• Competitive Pricing
The cutthroat competition in the current retail scenario has
retailers to guarantee excellent customer service to the
prefer them over their competitors.
• Pricing Below Competition
The price of the merchandise is kept lesser than what is
competitors.

5. • Prestige Pricing (Pricing above competition)
According to prestige pricing mechanism, the price of the
slightly above the competitors.
The retailer can charge higher price than the competitors
following circumstances:
 Exclusive Brands at the store.
 Brand image of the store
 Prime location of the retail store etc.

6. Psychological Pricing
§ Certain price of a product at which the consumer
willingly purchases it is called psychological price.
§The consumer perceives such prices to be correct.
§ A retailer sets a psychological price which he feels would
meet the expectations of the buyers and they would easily
buy the merchandise.

7. • Multiple Pricing
§According to multiple pricing, the retailer sells multiple
one) for a single price.
§The retailers combine few products to be sold for a single
§3 Shirts for $100/- or 3 Perfumes for $20/- and so on.

8. Wholesale Price
• Materials + Labor + Overhead + (Any Other Costs
That May Apply) = TC
• TC / number of units = AC
• find out the profit margin, typically
wholesalers strive for profit margins of
between 30 and 60 percent.
AC / (1 - profit margin percentage) = Wholesale
Price or Wholesale Price = Cost Price + Profit
Margin

9. Overhead costs can be classified as:
• Fixed costs
• Variable costs
• Semi-variable costs
Fixed overhead expenses are the same every month, no matter the
activity levels of a business. Think rent, licences, property taxes, and
other fees.
Variable overhead expenses increase or decrease depending on
how busy a business is. Variable costs include wages for certain
employees, storage space or equipment maintenance.
Semi-variable overhead expenses occur regardless of activity levels
but can change as business activities increase. For example, an
accountant might spend more on printer ink during tax season.

10. Example,
• A bulk distributor of decorative paperweights,
ABC Limited, seeks to set a competitive price
for its goods. Purchasing 50 paperweights from
the supplier will cost $5,000, plus $600 for
shipping and another $600 for overhead and
labour.
• ABC intends to achieve a profit margin
percentage of 30%.
• TC=5000+600+600=6200
• AC=6200/50=$124
• WP=$124/(1-0.3)=$177

11. Retail margin percentage
Retail Price - Cost / Retail Price = Retail Margin %
In the case of the swimsuits: $50 (Retail Price) - $25 (Cost) / $50 (Retail Price) = 0.5, or 50% (Retail Margin)
($177-$124)/$177=30%
a wholesale price of $30 and a 60% markup percentage:
•Convert the markup percent into a decimal: 60% = 0.6
•Subtract it from 1 (to get the inverse): 1 - 0.6 = 0.4
•Divide the wholesale price by 0.4
•The answer is your retail price
$30 (Wholesale Price) / (1 - 0.6) = $75 (Retail Price)
Wholesale Price / (1 - Markup Percentage) = Retail Price