Wanting to increase sales, one seller lowers the price to 2,000 rubles. To get around him, others lower it to 1,800, then to 1,500 rubles. When the price reaches 1,100 rubles, it is no longer profitable for all market participants.
The product, which used to sell well for 2500 rubles, is now of no interest to wholesalers, as the margin is tiny. The retail buyer is now not satisfied with the price of 2500 at all. Deliveries are decreasing, the manufacturer is suffering losses.
When else is the RRP profitable for the manufacturer: let's look into the details
If the product is inexpensive, the supplier strives for a area code philippines mobile large sales volume. In order to interest as many traders as possible in its product, it sets a favorable RRP for them - higher than that of competitors. This way, the interests of all participants are observed: the retailer increases revenue due to the margin, the manufacturer increases sales volumes.
A well-known brand, a high-quality product - the buyer is ready to pay as much as possible for the name alone. The manufacturer strives to sell at the highest possible price. By setting and controlling the RRP, it greatly inflates it.
When purchasing power decreases, people refuse branded goods. Retailers lose income, but the supplier does not make concessions and maintains a high RRP.
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Legal regulation of RRC
Legally, the RRP is not regulated in any way, and no one is responsible for changing it. The law only prohibits (Law on the Protection of Competition) imposing prices of a certain level on the end consumer.
In the contract between the manufacturer and the supplier, the RRP is reflected as a recommendation. And although the RRP is as justified as possible, traders ignore the question of why the RRP is needed. They are more interested in how to get around it.
The manufacturer sets and monitors the RRP by any means necessary, applying various sanctions in case of violation, including termination of the contract with the merchant. This is sometimes regarded as a deviation from antimonopoly legislation, and the merchant defends its interests by contacting the Federal Antimonopoly Service (FAS). The manufacturing company faces a fine.
Legal regulation of RRC
Source: shutterstock.com
One such case is a lawsuit filed by sellers against wholesalers supplying orthopedic equipment. The latter insisted on compliance with the RRP and threatened to apply sanctions in case of refusal. The FAS qualified this as pressure and violation of competitors' rights and sentenced the defendants to pay a fine of 31 million rubles. The arbitration court upheld this decision, and the Supreme Court refused to review the case altogether. (See RF Supreme Court ruling No. 305-ES21-28961).
What are the options to protect your interests and force the retail chain to adhere to the RRP?
Termination of a cooperation agreement with a commercial organization. The supply of goods to the retail network is significantly reduced or terminated.
Transferring a merchant to an intermediary. A merchant receives an order for a product and sends it to the manufacturer. The manufacturer delivers the product to the buyer, and the intermediary receives his reward. This scheme completely eliminates the violation of the RRP. There is no need to track it.