What is the Nationwide Retail Price Transparency?

Factors Affecting Retail Prices in the Domestic Market

Price is one of the fundamental characteristics of a product or service. Consumers analyze retail street prices to make a purchase decision. For sellers, determining the street price is a complex process that directly affects their profits. A seller seeks to set a price that allows sufficient sales to maximize margins. Many factors affect the product’s retail price:

• Product popularity (demand).
• Competitors and their pricing strategies.
• Product availability (issues with logistics, shortages, or monopolization).
• The level of consumer activity, and other factors.

On the other hand, the price is not just a matter of an individual seller’s profit. It is also a social factor that can cause a wave of social indignation and dissatisfaction against the citizens due to sharp price increases that are incommensurate with income levels. The availability of official statistics on price increases and inflation does not help smooth social tensions since citizens trust their own consumer experience.

Another key factor is a sufficient supply of goods. If an essential product is unavailable for purchase for a long time, consumer panic and negative public sentiment follow. The state tries to influence the prices of socially significant goods to avoid discontent in the country.

We will not consider situations where the country has not established private retail trade, and the state controls everything. Today, even Cuba and North Korea have small retail outlets owned by individuals, not the state. In a market economy, the state may have limited influence on price-setting through persuasion and signing agreements with large retail chains owning a significant market share. Agreements with retail chains give the government the opportunity to influence the prices of several goods throughout the country if regulation permits that.

Experience shows that state price regulation does not work for long, because entrepreneurs always have a motive to extract the maximum income, compensating for losses in one place by making a profit in another. In addition, the state usually cannot monitor prices in real time.

Ensuring Retail Price Transparency

There are many industry-specific cases that show price transparency. For example, stock trading, where all prices for commodities such as oil, metals, stocks, and other financial products are publicly available. Based on the open information and price dynamics, traders can make an informed decision whether to sell or buy.

Air travel is another example. Prices for these services are publicly available. Customers can order flying services through global booking systems. They can use search engines to find the most suitable transportation offer by examining prices, the number of transfers, and the list of airlines. Airlines usually use special programs to track competitors’ prices and the availability of their services (availability of seats). After analyzing the collected data, they set the prices for their own services to extract the maximum profit, which is determined by the sale price and how full flights are. Airlines automate the entire process, and people are not involved in the price setting decisions.

Price transparency is the practice of making retail prices publicly available to buyers and competitors.

Getting the real-time retail sales statistics is crucial for price transparency across the entire country. To achieve this, the state first needs to implement a digital tax administration system for collecting retail (B2C) tax invoicing. Such a system includes online electronic cash registers (OECRs) that transmit data about all retail purchases to the tax authorities in near real-time.

It is also necessary to implement a statewide system for recognizing products in the sales data by standardizing product names and classification. It must comply with the international standards for product classification or identification, such as GS1. This step helps to avoid an additional burden on entrepreneurs.

Next, the state should give a public status to the information about retail prices and point of sale locations. Otherwise, it will remain a tax and/or commercial secret. Following that, development of national retail data infrastructure similar to the global booking systems with open software interfaces (APIs) will enable the creation of automatic price-setting systems by retailers.

Unlike e-commerce, which reaches broadly across the country, brick-and-mortar shoppers have a strong local affinity. Access to public information about product prices helps consumers make an informed decision in favor of one or more local outlets. Creating such an infrastructure requires significant investment and time, but the result is an effective mechanism for obtaining feedback from consumers and retailers, which smooths out price increases in the country without state intervention.