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Sun 11 Jan 2009 04:00 AM

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Retailers risk losing consumers’ confidence

Some top UK high-street brands now cost as much as 50 percent more in the UAE than they do at home.

Our news analysis this week reveals that some of Britain's top high-street brands now cost as much as 50 percent more in the UAE than they do at home.

Budget fashion retailer New Look, for example, launched itself in the Gulf as "the UK's favourite value fashion chain," but there's scarce little value to be had when compared to the same products on sale on Oxford Street in London.

The resurgent dollar has no doubt played a major part, particularly when set against the ailing sterling. After breaking the $2 barrier last summer, the sterling has since plummeted and was last week trading at around $1.50, and so any price discrepancies are magnified significantly in the crowded malls of dollar-pegged Gulf states.

Still, this does not entirely excuse the extent of the premium levied at Gulf shoppers, and retailers must accept some responsibility. At a time where profits are tumbling around the world in the wake of shattered consumer confidence and paralysing credit constraints, Western chains are hoping Gulf spending will cushion the blows raining down on them in their home markets.

Although a shadow has been cast over the region in the wake of the low oil price and the woes of the real estate sector, the Gulf is still a bright spot - especially when set against the pitch-black economic mood that has engulfed Europe and the US. And like moths to a flame, retailers are heading here to take advantage of a rare opportunity.

For the moment at least, Gulf consumers are still happy to shop, and if retailers add on a little here, a little there, then who is going to complain? There is a dearth of prominent consumer watchdogs - indeed, most Gulf shoppers would probably admit there was little demand for them while the sun shone and $147 oil underpinned an unprecedented real estate boom.

This will not last. When consumers do begin to baulk - and they will, as economic growth in the Gulf slows in the wake of the global turmoil - retailers may wish they had taken a more far-sighted approach to the region.

The majority of Gulf mega-malls have sprung up in the last few years, and the majority of Gulf shoppers are still getting to grips with the vast array of different brands now available in the region.

They are looking to find brands they can trust; brands that they consider represent value for money; brands that they will continue to spend money on for the rest of their lives.

While international retailers cannot be blamed for charging as much as they think they can get away with - if people are prepared to pay, make hay - they should remind themselves that they are looking to attract consumers for life, not just Q1 2009.

A high price can make the consumer feel as though he or she is buying something exclusive; a high mark-up will make the consumer feel as though he or she is being taken advantage of.

Andrew White is the editor of Arabian Business English.

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Consumer 11 years ago

Have always been a big fan and regular customer of NewLook Dubai. Today ( Sat ) I even went for their 3 Day sale and have bought several clothings. Thought this fashion chain is genuine but now after reading this article, I am extremely disappointed. Guess this would be my last visit. Thank you and a goodbye, NewLook! Many thanks to writer Andrew White for sharing this piece of information.

paul 11 years ago

With the dollar (and pegged AED) having risen significantly, the buying power of UAE importers should have increased correspondingly. So this should not justify prices being so much higher if we are looking at the items alone. Of course, as another story on Arabian Business makes clear, the problem is rents. Landlords are still demanding higher and higher rents. This is financial suicide at a time like this. They will simply kill their tenants' businesses and then find themselves with empty stores all over the place. Rents will have to come down. The sooner they do it, the less damage all round. Delay a few months, and the malls will be ghost towns.