Dubai: Shoppers have a lot to look forward to in the coming days as leading retailers hold the line on any needless price increases on fast-moving grocery items during Ramadan.
Historically, grocery-related spending spikes during Ramadan.
This time around, retailers have responded by fine-tuning their ‘Ramadan basket' scheme. This way, shoppers can buy their basic food provisions at relatively lower prices.
Grocery retailers are also stocking up on food staples, dates, fruit and other essentials that will reach peak demand levels during the season. The move is intended to discourage consumers from hoarding or making bulk purchases.
"We have stocked up on a number of items consumed [in higher quantities] during Ramadan to ensure there's no shortage," said Kamal Vachani, director at the Al Maya Group.
"This will prevent people from hoarding. Also, the prices of any goods required during Ramadan will be absolutely down, as we operate on a very low margin."
According to Vachani, the group's Ramadan basket offerings will be 10 per cent cheaper — translating into immediate savings for the shopper. It was last year that the government stepped in to impose tight controls and random inspections to discourage price manipulations in the local market during Ramadan.
Subsequently, prices of about 400 products fell by an average 40 per cent, and a number of retailers were fined for overpricing their merchandise.
Low margins
V. Nandakumar of LuLu Hypermarkets said the company will adhere to strict pricing during Ramadan, adding, for good measure, it has always operated on low margins.
"It is our policy to never increase prices on our own — we always ask suppliers to get approval from the government before a price adjustment can be implemented in our stores," Nandakumar added.
"We also try to absorb additional costs. This year, we are bringing in a lot of products at very cost-effective prices. Our Ramadan basket will be 10 per cent cheaper."
According to The Nielsen Company, sales of certain food and beverage staples surge during Ramadan.
Featuring high on shopping lists are powdered beverages, concentrated juices, energy and sports drinks, rice, water, long-life milk, yogurt, laban, cooking oil and ghee.
"The increase in these categories' sales ranges between 5 and 20 per cent, with the only exception being concentrated juices, in which the overall category sales go up by three to five times during Ramadan," said Sevil Ermin, managing director for the UAE at The Nielsen Company.
"Concentrated juices, with typically low consumption levels during other times of the year, become an indispensable part of the iftar meals," he said.
Ermin said they were not expecting significant price increases across these categories this year.
Sales likely to slow down on weather and holidays
Ramadan has traditionally assumed a prominent place on the UAE's retail calendar. But retailers for their part forecast only modest gains in their sales performances this year.
Some say consumption traditionally jumps by 10 per cent during Ramadan and that the related spending represents 15-17 per cent of their annual sales due to the high shopper turnout.
However, with this year's Ramadan coinciding with the hottest weather and a school break, overall sales are likely to slow down.
Another blow to retailers' short-term performance could be consumers' reluctance to spend.
"This year, Ramadan happens during the hottest month and while schools are still on holiday," Sevil Ermin, managing director of The Nielsen Company, UAE.
"Most expatriate families, as well as some local families, might prefer to spend this Ramadan in cooler countries and we might therefore expect relatively softer Ramadan sales compared to previous years."
Still, grocery retailers are keeping their hopes up. V. Nandakumar of LuLu Hypermarkets expects a 7-10 per cent growth this year, while Kamal Vachani of Al Maya Group is forecasting gains of 5- 10 per cent.
"There's still a lot of visitor traffic coming in, so we're hoping for the best," added Vachani.
However, Rana Jaser, PR and corporate communications manager for Mercato and Town Centre Jumeirah, said footfall numbers normally decline slightly in August or towards the end of Dubai Summer Surprises.
She pointed to a steady flow during the first half of the year where numbers increase, leading to August, where numbers decline slightly, as expected.
Controls: profits bear the brunt
While government-imposed price controls during Ramadan provide some relief to consumers, they may not be in the best interests of retailers. According to a report by Euromonitor International, a strict implementation of price reductions is likely to affect merchants' profit margins.
A way out would be for retailers to focus more actively on their higher-margin merchandise.
The report stated that "... retailers are expected to gradually change their strategies and to run frequent promotions in a bid to remain competitive. Various retailers are also expected to start to focus on offering mid-priced and premium products, owing to the fact that the government mainly intervenes to control and monitor the prices of economy brands, which are affordable to consumers of all income levels."
Do you shop more often during Ramadan or try to spend less? Are you looking forward to good deals?
