Revealed: The cost of shopping in the Gulf

RETAIL COST: An expert says shoppers in the Gulf can expect to pay up to 15 percent more for goods compared to their country of origin. (Getty Images)

Products at international retailers in the Gulf should cost 10-15 percent more than in their countries of origin, but currency shifts could widen that difference, a leading expert has said.

Readers of Arabian Business have been expressing their outrage over the price of many goods at well known retailers, who sometimes charge 50 percent more for a product in the Gulf than they do in places like London, Paris and Singapore.

“The price difference between the UK and this part of the world should not be more than 10-15 percent,” said Naeem Ghafoor, chief executive of Skyline Retail Services in Dubai whose calculations included the UK's VAT levels.

One of the reasons it’s not is the strengthening of the dollar against most other major currencies over the last few months. All GCC currencies are pegged to the dollar, except for the Kuwaiti dinar, which is pegged to a basket of currencies.

Six months ago, sterling was worth just over $2. On Friday the exchange rate stood at $1.52.

Retailers in the Gulf typically pay for their goods six months before they appear in the shops, meaning that any price comparisons need to be based on the exchange rate that applied half a year ago.

In addition, retailers have to pay for transportation, royalties to the brand and an import duty of around five percent.

“Duty and freight could be anything between 10 and 15 percent,” Ghafoor said.

The wholesale price a franchise holder in the Gulf pays for a product from an international brand is also likely to be higher than what the brand charges its own stores.

“That’s a hard one. You wouldn’t be able to put a figure to that,” he said.

Some believe international brands may be raising that charge for Gulf franchisees in a bid to recoup losses elsewhere.

The rising dollar has stoked manufacturing costs for companies trading in sterling and euros, but retailers in places like the UK are unlikely to pass on those costs to British consumers in the current economic climate.

“It is very well possible that [this results in] some modest price increases in foreign markets such as the UAE,” Shuaa Capital retail analyst Laurent-Patrick Gally said.

“Although retail consumption here might have slowed down, we are still in a region where growth is going to be among the strongest in the world. Retailers know this.”

Inditex, owner of the Zara, Massimo Dutti and Pull and Bear brands, admitted that it considers the purchasing power of each market before pricing its goods.

“Inditex chains fix their prices in line with the commercial positioning of its products in each different market, taking into account the purchase capacity of its clients and the competitors’ level of prices,” the company said in a written statement.

“Also, we must to consider the different level of costs of each individual country (labour, space rents, services, etc.).”

The Alshaya Group, holder of the GCC franchise for brands such as Debenhams, Next and Topshop, declined to comment on the pricing of its products.

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