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
By Elizabeth Broomhall
Wed 27 Jul 2011 12:36 PM

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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