Business | Retail

Further price caps put UAE retailers in a fix

Retailers complain of squeezed margins of up to 75%

  • By Deena Kamel Yousef, Staff Reporter
  • Published: 19:54 January 14, 2013
  • Gulf News

Dubai: The Ministry of Economy (MoE) issued directives to fix the prices of 2,000 basic food items for the year — a move that retailers fear will result in shortages.

In a meeting held on Monday, the Consumer Protection department at MoE told the country’s major retail outlets to push the number of fixed-price items from 1,600 products last year to 2,000 in 2013.

The number of outlets carrying fixed-price items should increase from 340 last year to 400 in 2013, Dr. Hashim Al Nuaimi, Director of the Consumer Protection Department, told retail representatives including Spinneys, Carrefour, Union Co-operative and Al Maya supermarket.

He also asked them to compile a list of at least 100 basic items from their outlets that will contribute to the list of 2,000 fixed-price items. He encouraged them to attach labels indicating the price fix to spread consumer awareness.

The prices of the 400 additional items this year will be fixed according to 2012 levels, Al Nuaimi told Gulf News.

However, consumers complained of rising food prices last year, especially during Ramadan. Al Nuaimi also asked retailers to put 20 essential items on offer each month and pledged to waive the retailers’ cost of taking permission to run offers.

Retailers in a fix

Retailers had concerns about the directives, with some saying their suppliers may stop delivering the items if the lid remains put on prices, which could lead to shortages in the market.

“If manufacturers say it’s not economically viable to sell [at the capped prices], then we can’t sell the products. Especially manufacturers outside the UAE, they say it’s not worth their while,” said James D’Souza, general manager of the food division at Al Maya, after the meeting.

“Not only will there be shortages, but cheaper, lower quality products can maintain that price cap so the UAE will be engulfed with cheap products.”

Retailers said their margins are being squeezed by increasing prices from suppliers, the price caps by the government and a rise in global commodity prices.

“About 75 per cent of our profit margin disappeared,” said D’Souza. “We will conform with the government request, but is it suitable to the economy?”

How will they get through another year of price caps? “We are going to struggle,” he said, adding that they will try to compensate for the lowered prices by increasing volumes.

Retailers with a valid reason to increase their prices must, by law, apply to the Ministry of Economy and their request is considered by the Supreme Committee for Consumer Protection, which meets four times a year, Al Nuaimi said.

However, the three-month gap between each meeting means that retailers can be left stranded without stock if suppliers insist on increasing their prices, D’Souza said.

Al Nuaimi insisted that retailers should refer these suppliers to the Consumer Protection department to discuss the matter with him.

Other retailers asked if they could raise prices of goods outside the list of 2,000 fixed-price items, while others questioned how to prove some suppliers’ claims that they had permission to increase prices.

Comments (2)

  1. Added 11:09 January 15, 2013

    Excellent, I appreciate and am grateful to authorities for taking such steps so in UAE everyone can enjoy good/nutrient food and everyone is being taken care of. Once again I thank the authorities.

    MIRZA TANWEER UMER, DEIRA, DUBAI, United Arab Emirates

  2. Added 09:48 January 15, 2013

    This is a positive step taken by the authorities to ensure everyone in the UAE is able to afford a decent meal. the cost of living and food is the highest in the UAE. the retailers will naturally be upset with margins being squeezed, but the point is for the country to grow in the long term which would be possible if this country continues to be affordable for everyone. Short term margins are not good for society or for the economy. My utmost gratitude to the authorities for taking this decision to ensure all its citizens are taken care of.

    farida, Dubai, United Arab Emirates

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