What is a Retail Price?

Definition: A retail price is the cost paid for a good at retail stores. It is a term applied to the price that final consumers pay at retail outlets to differentiate from intermediate prices paid upward in the supply chain.

What Does Retail Price Mean?

The retail price is the final price that a good is sold to customers for, those being the end users or consumers. That means that those customers do not buy the product to re-sell it but to consume it. Retail price is differentiated from manufacturer price and distributor price, which are prices set from one seller to another through the supply chain. In competitive, free markets, the final seller or retailer sets the retail price considering costs as well as supply and demand conditions.

When setting the price, the retailer will try to obtain an appropriate profit margin but at the same time to show an attractive price in comparison to competitors. Anyway, the manufacturer can recommend a retail price in order to have some influence in the decision and thus to guarantee a price aligned to the marketing strategy.

Example

Phil Stores Co. is a small network of four retail outlets that mainly offer clothes and accessories for kids. The stores purchase their products from several distributors that obtain their merchandise from local manufacturers and importers. The Marketing Manager has to set the price of a new imported model of shoes marketed to girls aged from 10 to 13. First, he found that the distributor sold this model to the store at US$25 per pair.

The importer sold the product to the distributor at US$19 but suggested a retail price of US$30. The imported had researched the market and found that US$30 was a proper retail price. After some calculations, the Marketing Manager decided to sell the new brand at US$34 because the shoes were very attractive to the target market. However, the price seemed too high for many customers because other retail stores had similar models at US$29-31. After two weeks, the Manager lowered the retail price to US$31 and buyers reacted well.