MSRP and Retail Pricing may not be the same thing. One of the most common questions I am asked from new dealers, just getting into the business, has to do with MSRP (Manufacturers Suggested Retail Price) and why we would encourage dealers to charge more to the customer that what the manufacturers recommend. As I share with dealers, the Manufacturers Suggested Retail Price, is just that, a suggestion. It doesn’t mean that you must sell at that price. As an independent dealer you have the right to choose whether you use the recommendation from the manufacturer or not. Because of anti-trust laws, manufacturers cannot tell you what to sell a product for but can give you a recommendation which is the basis of MSRP.
In most cases the recommendation is based upon what the manufacturer perceives the market will support for the product they produce. But, as in most cases, what is good, for example, in Boston, Massachusetts, may not be good for Austin, Texas. Your job as an independent dealer is to evaluate your market based upon your experience and determine if MSRP will be your retail price. Understand that MSRP and Retail Price can be two different things. Let’s say that a part you carry is marked $30 MSRP and you sell the part across the counter for $30, then the MSRP and retail price are the same. Now, let’s say you take that same part and mark it up by 20% over MSRP. The MSRP is still $30; the retail price is now $36.
Don’t confuse MSRP with retail price. When you sell an item at retail, it is the amount you determined that retail was, not what the manufacturer suggested. As a dealer, you must set your pricing based upon your perception of what the market will bear. Trust me when I say, what you need to make on a part you sell in Chicago, Illinois is going to be different than the same product that is sold in Hattiesburg, Mississippi. It doesn’t mean you should sell an item for less in Hattiesburg, it just means you can make a better margin based upon where choose to set your retail price.
As an independent business owner your goal is to be profitable. If you can do that while maintaining your pricing at MSRP then good for you. But, if you can’t, don’t hesitate to move your retail pricing to above MSRP to keep your dealership healthy and strong.
