Dubai’s high retail prices send shoppers abroad

Expats say inflated cost of goods mean they shop in home countries rather than in tax-free Dubai
Dubai’s high retail prices send shoppers abroad
Retailers may be pricing shoppers out of the market
By Elizabeth Broomhall
Thu 08 Dec 2011 07:49 AM

The high cost of goods in Dubai may be driving shoppers away as expatriate workers admit to buying items abroad in a bid to avoid the city’s inflated retail prices.

A survey by Arabian Business found that 64 percent of expatriates avoided shopping in the tax-free emirate in favour of bulk-buying clothes and other goods in their home countries when on leave.

More than 90 percent of those polled said they considered cosmetics, clothes and electronics to be more expensive in Dubai when compared with the UK and US. More than half said prices were between 10 and 20 percent higher.

“It really affects the way I shop,” said one British expatriate. “I will wait until I go home to buy most of my stuff. I wouldn’t buy things that are more than 15 percent more expensive.”

A foreign worker from Scotland said she regularly felt over-charged by franchise branches of stores that are branded as bargain fashion chains in their domestic markets.

“I find that goods in Dubai are a lot more expensive,” she said. “The ‘no-tax culture’ does not seem to transpire into consumer goods at all. And there are very few offers in stores. It’s very irritating.”

High prices of retail goods have long been a complaint among Dubai expatriates, with many accusing shop-owners of neglecting American and British shoppers in their pricing policies.

In UK clothing store River Island, operated by franchise partner Alshaya, several items reviewed by Arabian Business were found to be significantly more expensive in Dubai than in Britain.

A top which was priced at £33.84 (AED195) costs £25 in the UK, while a dress being sold for £51.19 (AED295) in Dubai was just £36 in England.

Jeans priced at £43.38 (AED250) in the UAE sold for £30 in the store’s domestic market.

Significant price variations were also seen among electronics goods.

A 16GB iPad with Wi-Fi had a price tag of $571.55 (AED2,099) in Dubai’s Jumbo Electronics, though the same product could be bought for $499 in the US.

Apple’s 13inch 500GB MacBook Pro was also just $1,138.94 on Amazon.com, but $1,579.04 (AED5,799) in the Gulf state. 

Analysts said the gap in costs could be partly a reflection of the franchise model that dominates the GCC retail markets, and allows local partners to choose the price point of the goods.

“There is no one reason, but I think in some cases retailers are happy to leave the prices high because their margins are good and they make more profit,” said David MacAdam, a retail analyst with Jones Lang LaSalle.“And as long as the sales are strong, why not? The question you have to ask is: do they have to be competitive on a global basis?”

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Retailers said the higher prices were a result of the costs associated with shipping goods and franchise frees, and the region’s notoriously high mall rents.

“Retail prices for every franchise brand are higher than what the host brand would be able to charge in their home market,” said a spokesperson for Kuwait-based retail giant Alshaya.

The company includes Debenhams, Topshop and H&M in its brand portfolio.

“Firstly, there are incremental costs involved at every step of the supply chain including franchise fees, logistics costs, importation costs and then local factors such as mall rental costs and operating costs. The second reason is speed to market. We stock product in Dubai in the same week as you will find in London flagship stores and clearly the air freight costs required to achieve this are higher than the slower route of shipping goods by sea.”

Other retailers said price discrepancies in the GCC markets were determined by the manufacturers. Jumbo Electronics said its costs were dictated by the specific brands.

“It is the brand owners who determine these prices based on their own matrices of market size, product/brand positioning, logistics and, wherever applicable, location-specific taxes,” said

Deepak Khetrapal, CEO of Jumbo Electronics.

Store managers in Areej, a regional cosmetics chain owned by Al Tayer in the Gulf, also blamed the global brands for high costs.

According to one shop assistant, make-up names Estee Lauder and La Prairie had recently instructed all Dubai cosmetics stores to increase retail prices to end users.

The cost of the Estee Lauder foundation ‘double wear’, was now £35.05 (AED210) compared with £26.50 in the UK, and a 100ml bottle of the perfume Beautiful was priced at £79.65 (AED459) in the UAE, instead of £68 in Britain.

Estee Lauder admitted to amending its SRP (suggested retail price) on occasion, but said retailers had final say over what the end user was charged.

“We review SRP increases regularly, with the most recent adjustment in September 2011,” said Stefan Herzog, a spokesperson for Estee Lauder in the region. “[But] we do not control the actual retail price in the stores. We only make suggestions and they are the same across all stores.”

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