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Thu 29 Sep 2011 03:38 PM

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Retailers warn high overheads may spur price hikes

Rising operating costs will force stores to push up the price of goods, say firms

Retailers warn high overheads may spur price hikes
Retail accounts for about 30 percent of Dubais GDP
Retailers warn high overheads may spur price hikes
Retail accounts for about 30 percent of Dubais GDP

Retailers in Dubai have called for an overhaul of visa and business
costs, warning that escalating overheads may force an increase in the sale
price of goods in the emirate.

Businesses are running up significant tabs to absorb the
cost of retail space and of hiring new employees, CEOs said at a Chamber of
Commerce event in Dubai.

“I
want to make the retail business more flexible, easier to operate, and less
money,” said Mohi-Din BinHendi, president of BinHendi Enterprises. “Doing
business is getting more and more expensive, and we have to look at that. I
think everyone knows how expensive it is to get your employees across. Bringing
a person here costs me AED9,000, and I have almost 1,800 staff.”

Measures such as allowing retailers with significant
staffing needs to buy visas “in bulk” could come some way to offsetting the
cost of doing business in the city, he said, and avoid passing on costs to
shoppers.

“If we are seen to be playing games with our prices, [shoppers]
won’t forget. They do the calculations,” he said.

Dubai has spent billions of dollars establishing itself as a
prime shopping destination. Retail accounts for 30 percent of gross domestic
product in the emirate, home to about 40 malls, Standard Chartered Bank
estimates.

Dubai’s malls feature an indoor ski slope, an aquarium, ice
rink, and a ‘dancing’ fountain, similar to the Fountains of Bellagio in Las
Vegas. The city is the second-most attractive emerging market for retailers
after China, in part because of its high disposable income, says AT Kearney.

Rents in Dubai’s largest malls are among the Middle East’s
highest, Colliers said this month, deterring smaller brands from expansion in
the market.

Colm McLoughlin, CEO of Dubai Duty Free, the world’s largest
airport retailer, said the city was in danger of giving a “bad impression” to shoppers
if the price of goods continued to rise.

“The value aspect is being eroded,” he said. “I think
management are crazily high in their ambitions. It’s too simple just to blame
the mall owner just because rents are high.

“If you go into hotels here and buy a bottle of water,
you’re going to pay AED10-15. We buy that in Dubai duty free for 47 fills. When
I go into a hotel like a tourist and I buy one bottle and I’m charged [that] I
think that’s crazy.”

Khalid Al Tayer, CEO of Al Tayer Retail Group, said the cost
of managing a retail business, and the price of visas in particular, had become
a significant burden.

“Unfortunately over time, the costs do seem to get out of
hand and [they] need to be monitored very closely,” he said. “We need to start
renewing [visas] every three years, and our retail operation has close to 3,500
people. That can become quite costly.”

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SAM 8 years ago

Nowadays, when I go to mall in Dubai, I ask myself how do some retail stores make money and remain in business? No customer traffic, staff lounging around, , but still shops remain open, month on month. Since you can't force people to shop, cutting costs come to mind, including closing stores and sizing down. But what I see is the same retailers opening more stores in each and every mall in the city. Increasing prices may be a strategy if one is selling necessities and goods over which one has a monopoly, but a clothing retail store? Come on. Ignoring the new economic reality and enforcing stale business strategies is foolish.