Khaled rambles technology, tea/coffee, consumer rights and other interest from Saudi Arabia

May 31, 2009

Crazy retail mark-ups in the UAE

Filed under: General — Tags: , , , — Khaled A. @ 3:06 pm

Armina Ligaya over at the The National have written a great story on the crazy retail markups in the UAE. I decided to check it out since the Saudi Arabian and the United Arab Emirates markets are similar in many ways.

Most of the brands in Saudi Arabia are available through the UAE. For example, Apple in Saudi Arabia is distributed by Arab Computers who is a representative of Arab Business Machines in the UAE. So our two markets are similar in many ways.

An investigation by The National shows that local outlets for some of the world’s best-known shopping chains are marking up prices by 70 per cent or more. The evidence is hanging from the items themselves: the original price in the currency of origin and the local cost. Among the worst examples were a pair of girl’s jeans with a 78 per cent mark up, a photo frame with a 70 per cent mark up and a birthday card that was more than twice the original cost. Naeem Ghafoor, the chief executive of Skyline Retail Services consultancy in Dubai, said while import charges might be seen as an added expense, retailers in the UAE are exempt from the taxes applied in many parts of Europe and North America and enjoy lower labour costs.

Now this is an important fact, we have no taxes and that should understandably reduce the price instead.

“There’s no problem with charging more money, but it’s how much more you charge,” he said. “In my opinion, prices that are 10 to 15 per cent more expensive are acceptable. If you are over that you are ripping off the public.”

I can find a brand new Nokia N97 in the US for only 2,400SR while in Saudi Arabia it will be sold for 3,400SR.

Because the dirham is pegged to the US dollar, the exchange rates between the two currencies are stable. Yet, a Hallmark family photo album tagged at $20 (Dh73.40) for US consumers was sold at Gulf Greetings in Dubai for Dh125, a 70 per cent markup.

Being tied to the US$ didn’t help at all. This is an interesting article and I hoped that it would talk about technology as well as cloths and furniture.

I have talked about price gouging (or should I just call it “high mark-up”?) in Saudi Arabia (using Nokia E75/N97 as examples). You can read The National’s report on their site. You can also check their interactive price guide.