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Wed 27 Jul 2011 12:36 PM

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Supermarkets ban grocers over bulk-buying scam

UAE stores clamp down on small retailers snapping up cut-price goods to sell on

Supermarkets ban grocers over bulk-buying scam
The UAE said in June it would fix the price of 400 basic food and household items across 70 retail outlets
Supermarkets ban grocers over bulk-buying scam
Supermarkets ban grocers over bulk-buying scam

Small grocery stores in the UAE, hit by rising global food prices, have resorted to bulk buying discounted goods in larger supermarkets and selling them on at inflated prices.

Hypermarket chains Lulu and the Union Cooperative Society have been forced to ban some shoppers and limit the discounted items customers can buy in a bid to crackdown on offenders.

Khalid Humaid Al Falasi, general manager at Union Cooperative Society, which operates seven stores across Dubai, said it had barred perpetrators during its two-week Ramadan promotion.

“We can tell who they are because of their buying behaviour,” he told Arabian Business.

“They only buy products which are on offer and not other things, whereas most shoppers buy a selection of products. Also, almost 95 percent of our customers are families. These men come on their own and they tend to be Iranian or Indian.”

The practice was impacting on the firm’s profits, he said, which at the moment are heavily reliant on consumers buying luxury and higher priced products.

“We are selling a lot of our products, such as baby food and cooking oil, at 50 percent below cost in the lead up to Ramadan, but it is families and consumers we want to benefit from it, not the small grocery stores,” Falasi said.

Hypermarket chain Lulu, which has slashed the cost of Ramadan favourites by 15 percent and frozen the prices of more than 44 essential items, said the problem had hit stock levels.

“Whenever we put on a promotion we have noticed that some of the smaller firms come and buy a large quantity of the discounted products. We know who they are as it is highly unusual for a normal shopper to buy like this,” said Lulu Group’s head of corporate communications, V. Nandakumar.

“The problem is that we will promote our offers to consumers through different media, and then genuine customers will come to buy something and there will be nothing on the shelves because somebody has come in and taken huge amounts.”

Smaller grocery stores have struggled to stay afloat amid soaring food prices. The rise in costs played a key role in the political unrest that toppled leaders in Egypt and Tunisia, and spurred the UAE to roll out a slew of measures aimed at subsidizing basic items.

In June, the OPEC member said it would fix the price of 400 basic food and household items across 70 retail outlets in the Gulf state. The scheme was backed by Carrefour, Lulu, and a number of cooperative societies that together hold 75 percent of the UAE’s retail market.

In the run up to Ramadan – which traditionally spurs a jump in food sales - stores have also been asked to slash the costs of basic commodities by 20-50 percent.

Retailers face legal action and fines of up to AED20,000 if they raise the price of essential items fixed by the economy ministry during the Holy month.

Nandakumar said smaller grocery stores were struggling to stay afloat amid pressure to keep food prices low in the face of fluctuations in supply costs.

“We get better rate from suppliers than local grocery stores and we work on bigger volumes, so it’s easier,” he said.

“Smaller groceries can’t buy stock from the distributor even for the sale price of Lulu products.”

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pete 8 years ago

I see no reason why smaller groceries cannot buy in bulk for cheaper price to sell to their customers. There is no level playing field when the smaller groceries are forced into a corner for not able to compete with the mega super market. The smaller stalls need to make a living from the profit they make out of cheaper price offered.

Chris 8 years ago

Owning a small corner store, I was charged double from the manufacturer on some prominent Ramadan lines on what I could pay for the same items at Carrefour. Still we need to make a profit to pay our staff. We provide a very personalised service to our customers that no supermarket can hope to provide.
The larger stores subsidise from other lines and are not local and responsive to the needs of local clients.
Our margins in the corner stores are paper thin. Supermarkets are a property game with suppliers paying for (renting) space on the shelves. We can not do that with corner stores.

Noble 8 years ago

Monopolism should be avoided. There should be equal opportunities in the market for the big and the small supermarkets. This is highly unfair.

Afridi 8 years ago

This is totally unjust. On one hand, governments keep talking about supporting SMEs and on the other, such rules actually help eliminate them. If this isnt stopped, it wont be long before mega stores like Lulu, Carrefour, Union Coop etc will start fixing prices among themselves.

BinAdam 8 years ago

A good solution would be for the majority of the small and medium sized stores (which presumably account for 25% of the UAE market) to form a cooperative and pool their resources in order to benefit from the bulk discounts that the giants are currently receiving. If this is not initiated by the store owners themselves then maybe the ministry of industry can work to spearhead a campaign to form a cooperative which would help the UAE avoid an oligopoly situation which maybe detrimental to UAE consumers.

Glen 8 years ago

Since when did anyone have to legislate on free enterprise. If a supermarket has an offer they are free to place a limit on the quantity purchased by anyone.
Other small shop owners also have families and can shop with thier wife or indeed staff members to look like families are shopping.
And finally since when is it an offence to mark up goods for resale, if the customer is not happy with the price he is free to shop elsewhere.
More attention should be paid to shops that sell imported goods at more than double you pay if you order those same goods online and get delivery to your door, or is this prfiteering encouraged.

Vijay 8 years ago

This is like promoting monopoly. The smaller stores provide service to the customer and should be free to charge as they deem fit to keep their business afloat and make decent profit. There are no subsidies from the government on any of the items. 90% of the foodstuff is imported.