x Abu Dhabi, UAESunday 21 January 2018

Shoppers must set price expectations

Shoppers who buy high-end luxury goods in the UAE's shops are not suckers; they're buying the whole shopping experience.

Three years ago, an investigation by The National revealed that local retail outlets for some of the world’s best-known shopping chains were marking up the prices of some of their products by, in extreme cases, as much as 70 per cent. Shop owners defended the mark ups by citing transportation costs and high rents, and the need to balance discounted items. At the time we were sceptical of these claims.

Three years on, little has changed – not the high prices of some high end brands, and not our scepticism of the mark ups.

As The National reports today, shoppers across the UAE are paying as much as 25 per cent more for major fashion brands than buyers in other parts of the world. And while a tax-free market and relatively low labour costs would normally lead to lower prices, shop owners insist they are not cheating their customers.

Technically, they are right. Many higher end brand names to show the original currency cost, like US dollars or pounds sterling, and convert directly to the dirham value on the price tag. Such transparency is welcome.

The trouble comes in the maths. In the US and UK, for instance, total prices include taxes; tax-free shopping is what brings many to these shores. It stands to reason then that without taxes, prices could be lower.

Certainly, most consumers who shop at high-end outlets are savvy enough to either price compare, or know that they are paying more voluntarily. They may have the right to complain about unreasonable mark-ups, but ultimately they are in general happy to pay top dollar for luxury items. Shopping is for them an experience they are willing to pay for.

The challenge comes in controlling the trickle-down. When high prices are placed on medium or lower-end products, market forces should come into play. Smaller shops will soon find customers will simply take their business elsewhere. There may be an argument for temporary price controls on food items, but controls on consumer goods should be avoided. Shoppers, in healthy markets, can simply vote with their feet.

The UAE has over the last decade or so become a luxury destination, and enjoying the “shopping experience” in the malls of Abu Dhabi and Dubai is an integral part of most visitors’ itineraries. But attention must be paid to ensure that “experience” doesn’t including getting fleeced.