British retail brands go big on promotions in UAE
They are aggressively offering promotions with an eye to clear stocks as pound dips
Dubai: British brands — and their local retailers — are getting generous with their discounts and promotions as they try to offset the sharp erosion in the pound’s value from Friday. Since Saturday (June 25), UAE shoppers have been receiving text messages highlighting tempting offers from some of the leading British apparel brands, for purchases made at the stores or via their online portals.
“The brands need to sell off their current stocks at the earliest, since these were brought in when the pound was holding its own against the dollar/dirham,” said a top official at a leading local retailer. “With the pounding the UK currency has been getting since Friday, the “perceived value” of these goods will have come down in shoppers’ eyes. They wouldn’t want to be paying for a brand at a pre-Brexit pricing level.
“In the coming days, local retailers holding British brands should be taking every possible step to clear off their current merchandise, even cutting their margins drastically if it helps. They need to before the next shipments — which will reflect the weakened state of the pound — come in. They will not want the higher priced older stock to pile up.”
The pound was pummelled on Friday (June 24) as the results started streaming in from the referendum vote, with the currency down as much as 11 per cent to the dollar. The losses continued in early trading on Monday, as global investors were seemingly in no mood to relent on the pressure they were putting on the pound.
Historically, British mid-market clothing brands have been hugely successful in the Gulf despite stiff competition from other lower priced European brands and, more recently, even from Turkish value-for-money labels.
Even if the clothes are made in China or sourced from factories elsewhere, their UAE prices are based on what the British brands retail for in the UK, including the VAT charges in force.
For local retailers of British luxury brands, the weakening pound comes with other headaches. “It does make buying from a store in the UK much less expensive than it used to be,” said a top official at one such retailer. “If pricing of the same product is not adjusted immediately at the UAE store, the chances are shoppers will not be interested. And these are shoppers who do travel frequently.
“There’s already a deep-rooted perception that the profit margins on luxury goods sold in the Gulf tend to be higher than what they are in Europe or the US. If local luxury retailers move too slowly to correct the prices to reflect the currency changes, it will be detrimental to business.
“They will need to monitor the brand prices not just in their own market, but in all the key international destinations where the brand has flagship stores.”
It will help the brands and retailers that they are trying to get shoppers’ attention in the run up to the Eid holidays, one of the peak points in the region’s retail calendar. This applies as much to fashion labels as upscale British-made automotive brands.
A spokesperson at BMW Group M.E. responding on the manufacturer’s short-term strategy for the Mini line-up said: “Our importers currently have attractive promotions running to celebrate the month of Ramadan. Ramadan is historically our importers’ busiest month of the year due to the attractive offers.”
Indeed, the current Eid promotional cycle offers brands some space to clear inventory and prepare their strategy for future shipments, if, as many anticipate, the pound continues to weaken.
But Bank of America Merrill Lynch in an update suggests a soft pound need not be the new normal. “Further GBP losses are likely over the near-term and a move towards 1.30 in GBP/USD cannot be ruled out,” the report states. “We would, however note that sharp sell-offs in GBP have historically proved short-lived.
“For now, this may not be the time to ‘catch a falling knife’.”
But for UAE shoppers in the here and now, it’s the time to start bargain hunting for British brands. They wouldn’t mind an extended weak spell for the pound, surely.
