Why are some products on sale and others are not?

This is a very common question in retail. Why can't the same discount found on a pair of sandals be given on, say, a belt? Many factors determine the asking price for products in both physical stores and also online retail. Something many consumers may not be aware of, though, is that manufacturers have some power when it comes to how much their products can sell for.

In a fair trade market, when sales are competitive and customers are discriminating, it is a useful technique to reduce the price of a highly sought after product in an effort to bring in sales. Unfortunately, doing so means retailers get into a "how low will you go" competition and eventually one store will not make as much on the sale of an item as another. This, in turn, means manufacturers lose on orders placed by retailers as fewer orders are place by retailers who are not selling as much inventory.

The manufacturer's answer to this problem is Minimum Asking Price, MAP, which are agreements signed with retailers that restricts what the retailer asks a buyer to pay for a product. One might wonder why a retailer might agree to a voluntary restriction to the price they can choose to set for salable products. Yet, there are benefits. Worked into these agreements are usually certain benefits to the retailer, which when weighed against the inconvenience of limiting asking price, provide alternate benefits.

On many tagged products there will usually be a price titled MSRP. This amount is what the maker of the product suggests retailers sell the item for. Consider Rainbow Sandals, for example. This maker of fine quality sandal footwear recommends the single layer Premier Leather sandal be sold for $50.99. 

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