Dubai: Preferring to round off purchase prices at multiples of 25 fils rather than dole out exact change in 1, 5 or 10-fils coins gives the advantage to the business owner, says one UK economist.
In small convenience stores or coffee shops where the sales of units are high, the higher number of purchases per day rounded up to the nearest dirham could be increasing profits from one per cent and even higher.
"It's taking place in small cash transactions I would assume in retail," said the economist who spoke to Gulf News on the condition of anonymity. "Such a practice could earn up to at least one per cent and much higher."
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In very small non-franchised coffee shops where countless coffees are sold each day, customers are more than likely tip the store owner if the change due is less than 25 fils, the economist said.
"Shops that are typically small could be doing this to increase their profit margins. It wouldn't happen in larger amounts because people pay for larger items with debit or credit cards," he said. The problem within the retail industry is that many shops and stores bank on the long-standing practice of using prices that are not rounded off in the first place to make a product appear less expensive and therefore more affordable.
"They're getting away with taking a little bit at a time," he said. "They keep things at these numbers to make them seem cheaper."
The tiny amount of change kept by store owners is not enough to make a dent in the economic prosperity of the UAE when considered on a larger scale, said Mohammad Al Asoomi, an economic advisor in the UAE.
Rounding off prices has become the norm in recent years in the UAE because inflation has made 1, 5 and 10-fils coins impractical in the marketplace, he said.
"Ten years ago you could buy a loaf of local bread for 10 fils, today its way more," he said. "A 10-fils coin today is useless; you can't buy anything now with it."
Impractical to use
Given its impractical use, Al Asoomi said very few people actually carry the small coins and the coins under the 25 fils are not used much. "You don't find this in the market. If it is 25 fils [and up] they will give it back to you," Al Asoomi said.
Given the very tiny relative worth of the smaller coins, Al Asoomi said he couldn't see any impact happening to the UAE economy from rounding off purchase prices.
"This would not affect the economy," he said.
