Top foreign retailers said marking MRP on individual products increases production cost that is eventually borne by the consumer. In Ikea's case, labelling cost per store could be as high as Rs 7-10 crore. As a result, the consumer affairs ministry has finally relaxed the labelling norms for the next one year and has laid down conditions for alternative manner of declaring prices.
"Retail sale prices of the products in a store will be displayed through labels fixed on the racks. Additionally, the prepackaged commodities for sale shall contain bar codes on the principal display panel, which will show the retail sale prices by using the scanners available across the store," said the order issued by the legal metrology division. "Removing the MRP requirement on label for packaged products is a positive step by the government towards establishing modern retail practices," said Patrik Antoni, deputy country manager of Ikea India. "This will allow a more integrated way to communicate price in a multichannel environment."
Industry experts welcomed the move and said India is one of the few countries that follows the archaic practice of mentioning MRP. "It actually increases price of the product," said Arvind Singhal, founder of retail consultancy Technopak. "Instead of MRP, companies should ideally be mentioning recommended retail price (RRP). Then, retailers can vary the price according to, let's say, the location of a particular store. A store in a posh locality with higher rentals can charge more for a product compared with a store in a rural area. Currently, companies hedge the overall production cost and calculate an average as MRP."
The new order on labelling norms also specified that once a pre-packaged product is imported or packaged within the country, its retail sale price shall not be escalated upwards during its life cycle.
Although the development has been welcomed by most single-brand retailers, multibrand giants expressed disappointment. "The distinction between single-brand and multi-brand retail does not exist anywhere else in the world," said Kishore Biyani, CEO of Future Group, which runs multibrand retail chains such as Big Bazaar, apart from several other single-brand ones.