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Gulf retailers could drop product prices next year

High street stores could be impacted by price reductions in Britain, retailers say

Retailers in the Gulf could drop their prices next year in a bid to retain regional customers amid tough economic conditions, brand managers have said.

Stores in the high street segment could be impacted by price reductions in Britain, experts say, which in 2011 saw the biggest slump in retail sales for more than 16 years.

“I think most retailers will decrease their prices [next year],” said Hasit Kakkad, retail manager for Matalan in the region.

“A lot of the big high street brands are bringing their prices down in the UK and that normally reflects in the region within weeks. We are seeing it with the autumn-winter [collections] already this year, and I’m sure the spring-summer range will be a lot cheaper in 2012, as it will be our toughest ever for retailing in the Middle East.”

Dubai-based distributors say US and Asian firms have also been cutting costs in an effort to lure spending, slashing the prices of many of their latest gadgets in the hopes of outselling the competition.

This will continue to have a domino effect on the region in 2012, retailers said, driving down the prices of many top quality technology goods.

“We’ve seen prices continue to drop throughout 2009, 2010 and 2011, and we don’t expect this trend to stop,” Ashish Panjabi, the COO of Jacky’s Electronics in the UAE, told Arabian Business.

“Ultrabooks which are currently priced at $1,000 are expected to cost $699 by the end of 2012 according to the Chairman of Acer. Tablet prices are already being challenged in the United States where Amazon released their Kindle Fire recently at close to half the price of the competition. Apple prices are the only real exception.”

The Gulf has attracted a spate of local and international retailers in recent years, all of whom are looking to capitalise on the high disposable income per capita and regular inflow of tourists.

Dubai, the region’s shopping hub, has added more than one million sq m of shopping space since 2006, and is home to around 40 shopping malls. Retail now accounts for around 30 percent of gross domestic product in the emirate, Standard Chartered estimates. But despite the high number of brands and availability of products, foreigner residents complain that prices are too high in Dubai.

A survey by Arabian Business earlier this month found that 64 percent of expatriates avoided spending in the tax-free emirate in favour of bulk-buying goods in their home countries when on leave, in a bid to save money.

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.”

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.

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 believe the gap in costs could be a part reflection of the franchise model that dominates GCC retail markets, and allows local partners to choose the price point of goods on a local level.

Others said higher prices were linked to costs associated with shipping goods and franchise frees, and the region’s notoriously high mall rents.

Distributors argue they have no say over prices, with most being decided by the manufacturers.

Price drops next year may go some way to solving the problem, forcing retails to reduce prices if they want to remain globally competitive.

“Whether all the franchise partners in the Middle East will definitely drop their prices I’m not sure,” said Kakkad. “But most of them who are worth their salt will, because it’s the right thing to do.”


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