x Abu Dhabi, UAEThursday 27 July 2017

Retailers need to explain price rises

Consumers should be aware of the risks for shops during seasonable hikes in demand while supplies are the same.

Every year before Ramadan, authorities give stern warnings to retailers not to raise food prices during the holy month. But, partly because the demand for food rises, prices do go up - and especially so for perishable items. Since fluctuations can be justified on the grounds of supply and demand, it is curious that some retailers are not being open about price rises.

A report by the Statistics Centre of Abu Dhabi (Scad) in the first week of the holy month suggested that food costs in the emirate rose by an average of 1.9 per cent, with prices for vegetables jumping by as much as 7.9 per cent. Vegetable prices increased even more in the second week - up to 14.4 per cent compared to pre-Ramadan levels. A Scad official told The National that these rises were greater than necessary.

But when the retailers were contacted by The National, they either denied that their prices had gone up or refused to comment on the subject. Some smaller retailers said that competition pressures prevented them from speaking, while the larger supermarkets - Spinneys, Abela, Lulu and Waitrose - all refused to comment on Scad's findings.

A survey at the Mina Fruit and Vegetable Market, which supplies many supermarkets, found that prices differed from one stall to another, with some sellers charging twice as much as others for the same produce.

It is clear that some price rises are justifiable - especially when it comes to seasonal produce where the extraordinary demand generated at Ramadan and Eid outstrips the supply. But, as one supermarket manager pointed out, fierce competition between the major chains should ensure that nobody is price-gouging.

At the same time, it should be acknowledged that some customers will be happy to pay more for their goods at neighbourhood grocery stores because of the convenience of not having to drive to a larger supermarket and paying for parking.

But consumers need to be aware of the limits of controlling the prices. Large shops can afford to plan ahead in terms of supply and order enough food for the month. Smaller shops maintain their regular supply, only to be overwhelmed by the high demand, and might raise the price.

Supply is elastic and shops, especially small ones, tend to have fixed quantity. Consumers should be aware of the risks for shops during seasonable hikes in demand while supplies are the same.