Calculating MSRP and MAP for Amazon – Part 3

Let’s say a product is $30 cost price. The map is $99.95 cents. And the list price or MSRP is $129.95 cents. The map, as well as the MSRP are optional. A company needs to have a map agreement in place to legally protect their prices. If the map is filled in on vendor central, Amazon will not violate it, but they will not reinforce it.

If other resellers violate it, there is not really a highest margin. Amazon will accept pretty much anything that is entered in that field. However, If this makes an item non-profitable they will simply not order it. Your margin or markup to calculate your map or MSRP strongly depends on the product category, higher priced products.

For example, backpacks or other high end brands usually have a slightly lower map on Amazon compared to their MSRP or sales price on their own website. In general, it is very important that a company follows a corporate pricing strategy, and that is very difficult. Map agreements can help you with that, but it takes more than that to reinforce them and also have the businesses resellers, follow them.

often, if the map equals the MSRP or list price, then Amazon does not provide the strike through price on the product detail page, as it means the customer is not really getting a discount. So there is no point for Amazon to display the RRP or MSRP. Again, it very much depends on the business strategy and how a company wants to position themselves on Amazon.

A general recommendation would be your cost of goods sold is X. Your cost price to Amazon then is this X value plus the internal set profit margin, often between 10 to 20% plus all terms and agreements with Amazon, your MSRP or list price is then two and a half to three and a half times the cost price to Amazon, depending on customer sales price, products, and product category.

A lower priced item will have a higher MSRP factor. The map is then the MSRP or list price minus north to 20%, depending on the business’ pricing strategy. It is always best to discuss your model internally and your pricing model or MSRP model with your vendor manager or buyer before committing to anything.

Your buyer will be able to advise you if your costs or your MSRP are unsuitable and could result in your listing being rejected by Amazon. One final item to note is that Amazon does give discounts on your products without requesting or needing your approval. This can result in arguments between yourself and your other retailers or distributors.

This is the age of eCommerce where borders no longer access. And to try force wholesalers and retailers of your product to commit to an MSRP is tantamount to price fixing or similar. It is therefore vital that regardless of the discount offered on your product by Amazon, your MSRP is still advertised on the product page so that you firstly honor your brand value.

Secondly, honor your own MSRP as given to your other wholesalers and distributors. And finally. Illustrate the value of your product to the consumer.