Bargains are scarce in the UAE – Retail

By Nadeem Hanif

Waffi Mall Dubai © sachaorloff | 2011

DUBAI // Chantelle Innes approaches the shop checkout with more than a little trepidation.

“It’s hugely frustrating when you see prices for goods that are 20, 30, even 50 per cent higher than in the US or Europe,” she says.

The South African has been in Dubai for 12 years and has seen a sharp rise in the cost of items that were already more expensive than other countries, she says.

Her experience will be familiar to consumers across the Emirates.

A relocation adviser, who helps newly arrived expatriates to settle into the country, Ms Innes has one piece of advice for clients who may have hoped they were moving to a shopping haven.

“Either shop online or wait until they have a trip to Europe or the US and do their shopping there.”

It is often cheaper, she says, to order what she wants online from her home country or the US and have the product shipped than to buy it here. The difference, she says, is particularly marked for computers, cameras and swimwear.

A Fujitsu TH700 tablet laptop sells for Dh5,999 in Dubai but costs almost a third less – a little more than Dh4,000 – in the US. The gap is almost as big for a Nexus S smartphone, which costs Dh3,499 in the UAE but only £429 – Dh2,577 – in Britain. A Burberry Nova Perspex handbag can be had for Dh2,175 in the UAE, but Dh1,820 ($495) in America.

And prices in the UAE’s malls have continued to rise even as prices have fallen in many other countries in recent years.

In consumer electronics, for example, the average unit price rose by 3.3 per cent during 2010. In the UK, where retailers are still struggling to persuade recession-hit shoppers to open their wallets, the average unit price fell by 1.7 per cent fall.

And that average figure masks some bigger jumps. The cost of DVD players rose by 12.7 per cent in the UAE, and the price of projectors by four per cent.

Here, the economy has largely recovered; in any case residents who lose their jobs are swiftly repatriated, lending the malls a permanent feeling of plenty.

And stores are very noticeably busier than at the height of the crunch a couple of years ago. Despite higher prices, consumers are continuing to spend and retailers are reaping the benefits.

The UAE’s retail sales have grown to $107 billion in 2009 from $104 billion in 2008, and are expected to hit $120 billion by the end of this year – more than eight per cent up on 2010, say the property consultants Cushman and Wakefield.

Retailers say higher prices are a reflection of the extra real extra costs they must bear. Rental is expensive. Despite a fall of nearly a third last year in the cost of renting space in its major malls, according to Cushman and Wakefield, Dubai’s ranking actually rose.

Declines everywhere else meant that while in 2009 Dubai had the world’s 46th most expensive retail space, last year it was 42nd, according to the firm’s most recent Main Streets Across the World report.

Those rents have now more or less stabilised at similar levels in Dubai and Abu Dhabi, says Hannah Jeffery, of Cushman and Wakefield’s Dubai office, and they are unlikely to fall much further in the short term.

Retailers are willing to pay to get access to the most well-heeled shoppers – allowing mall owners to charge a premium.

The reality now, says Ms Jeffery, “is that Dubai offers very competitive opportunities compared to other international locations.”

A square foot of retail space in Mall of the Emirates can be had for $109 a year. That is dwarfed by the cost of the same space on New York’s Fifth Avenue: $1,850, the most expensive in the world

That difference, according to Sana Toukan, Middle East research manager for Euromonitor International, is down to a divergence in the broader economies. “People in Europe are still holding on to their cash as the economy remains stagnant.” Not so in the UAE.

UAE retailers also face other costs, including freight, import duties, currency fluctuations, extra handling and franchise fees, according to a spokeswoman for the British-based clothes chain Next.

Freight has been particularly significant in recent months as the price of oil has soared.

“The UAE market is highly reliant on imports, especially within the consumer goods’ market, says Ms Toukan. Because of that, “commodity prices are linked to petrol prices”.

Still, says Tarek Coury, an economist at the Dubai School of Government, the biggest factor is simply that retailers are charging what they believe they can get away with.

“The situation we have here is that mall retailers don’t set prices in comparison to the region we are in but rather places like Europe and the US, which have VAT and sales taxation,” he said.

Consumers in the UAE, he says, are paying inflated fees because they can afford to, and prefer the convenience of shopping in malls – and that in turn is encouraging retailers to keep prices high.

“These retailers are to a degree fleecing customers here, but it must also be pointed out that many people are more than happy to pay these prices,” he continued.

“The majority of consumers I would say are ill informed about the cheaper options they can get by shopping online. We also have to take into account tourists who believe no taxation means cheap prices and happily pay.”

Or not so happily. Rakesh Chouhan, 37, an Indian father of three who works in banking, is well aware that he could get the same goods for less money elsewhere, and says he dreads going to the mall to shop.

But sometimes he has little choice. “Shopping online is good in theory but you have to wait two weeks for it to be delivered and hope it’s not damaged.

“I have three young sons and when they see something in the shop they like, they want it there and then,” he added.

“Malls are expensive but they are more convenient than searching online for cheaper prices.”

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Filed under Luxury Middle East, Study

4 responses to “Bargains are scarce in the UAE – Retail

  1. :

    very interesting information and very true. I just finished a survey in the UAE market last week and have same opinion.

    • Thank you Jamal, it is very interesting, once back from the UAE and Saudi Arabia, I will publish our own research on the retail market in this precise area, from what is said inside the GCC and what is known in Europe there is a world of difference. Extremely satisfied to be here and to see with my own eyes the reality of the market.

  2. Is there any duty or tax to pay on arrival to that area?

    If there is, that could add to your import costs.

    Also, does the US comparison include local sales tax?

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