By Elizabeth Broomhall
Expats say inflated cost of goods mean they shop in home countries rather than in tax-free Dubai
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?”
Article continues on next page…
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.”
Totally agree that prices in Dubai is higher compared to UK or US.
Factors such as strength of the currency as well as high margins play factor.
Perfumes cloths, shoes etc, its cheaper if we get it down from UK. As a Sri Lankan, i have few known who travel to UK back and forth on Business trips.
Dubai was known as shopping destination. If we dont fix this, we will lose the shine.
I object to higher prices, but being in the industry I can understand them.
Firstly, not all of the comparisons in the article are completely fair. An iPad in the US may cost $499, but for any American, that is before state and county sales tax is added e.g. shipping to NY would take it to $543 (AED 1,992 - even if bought online).
Additionally, for global brands we are generally grouped into the EMEA region, which means local distributors are forced to buy at GBP or Euro prices. The same iPad retails for GBP 332.50 ex VAT (AED 1,918) in the UK. With the 5% import duty we are up to AED 2,013 so, yes, it is higher at Jumbo, but still cheaper at AED 2,099 to buy here than in the UK where you would have to pay VAT and AED 2,301.
The biggest reason prices are higher here is that the market is so small but costs are the same. 10% extra RRP can double the profit on an electronic item and so make it viable to sell here. It comes down to do you want it more expensive or not at all?
UAE, infact GCC is around 20% more expensive for consumer goods as compare to UK. Bearing in mind, in UK we pay 5% import Duty and 20% VAT (Sales Tax). For example, I can buy16 GB I Phone 4S in UK from Apple directly for GBP499 (AED2894) as compare to GBP620 (AED 3600) in Dubai. Remember the actual price without tax is arround Â£415 (AED 2407) which is what non EU tourist will pay in the UK, as they can claim VAT back at the airport.
We are family of 4 from London, living in Dubai for 4 years now. Twice a year we go to London and do our cloths shopping there during summer and winter sales at the discounted prices of around 70% on average. This results in significant savings for us.
I think retailers in GCC need to be united to increase their buying power, so they can negotiate better prices with manufacturers and be more competitive at international market.
The more expensive the product , the more you are ripped off. A certain luxury watch chain charges 3,000 GBP (Pounds Sterling) MORE in the UAE for the exact same watch in the UK.
Soon, when all of these online shops provide offers for those buying from another country and offer cheap international postage to the UAE, retailers here will be in trouble. But it will be Karma for them ripping us off for so many years!
Having said that, car prices are great here :-)
no surprise - the retail market in dubai is based on the high influx of tourists - often when on vacation you tend to be less influenced by the actual price....
Furthermore, which is no surprise either, the rent in Dubai is just out of proportion - the attitude is more towards trading than actual retail.
So to sum up the situation: greed and lack of a sustainable retail strategy could push Dubai's retail industry into huge problems. What if tourism drops with i.e. 10 - 15 pct? What if the local community holds back on their spending habits?
Will the retail sector be saved by dubai shopping festival? It's time for Dubai to rethink it's retail strategy
I had to return home recently, and needed a a quick winter wardrobe and think even the discounts mentioned in the article are a little conservative.
Heres some real examples of prices as I'm a real scrouge and like value for money!
Diesel jeans in the UAE AED 900 and in the UK AED 600
Hugo Boss scarf in the UAE AED 540 and in the UK AED 240
Hugo Boss jacket in the UAE AED 2,000 and in the UK 1,600
Bargains and thats considering the UK is even more expensive than the USA!
Plus you get the VAT back at the airport, so you get another 10 - 20% approximately off, as you do pay an admin fee.
I would suggest you go to the UK for your shopping this christmas.
Also none of the goods are home market as the retailers state, as none are made in Britain, have to be shipped and have dues paid etc.
What we need are some real independant shops here that can undercut the fixed market.
It's true that the iPad was a bad example.
However, try the same comparison with a Macbook, Macbook Pro, or Macbook Air.
The price gap is ridiculous!
We have also to consider the extreme high rent per example in Dubai Mall or Mall of Emirates. As per my information Emaar has increased the rent this year significantly without considering the actual rent situation in Dubai. This is affecting directly the retail price. Many of the shops are not making any profits and are closing their outlets.
@Yab...try explaining this to the Mall Management...chance are they will tell you vacate!.
That is so true, its sad to admit but I would rather buy abroad than in the UAE. I sometimes feel I am being used by these retails to follow under a certain stereotype thing above the realistic earning income of the average target customer.