Profit margins hit hard by DSF retail price wars

Low margins driven by intense competition among Dubai-based consumer electronics retailers is the key theme shaping this year’s Dubai Shopping Festival, according to industry identities surveyed by ECN.

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By  Ronan Shields Published  February 6, 2007

Low margins driven by intense competition among Dubai-based consumer electronics retailers is the key theme shaping this year’s Dubai Shopping Festival, according to industry identities surveyed by ECN. The situation is also being impacted by claims of consumer indifference to this year’s DSF from a number of retailers, who question the timing of the event given its proximity to GITEX Dubai and Eid. “I think if DSF was delayed it would prove a greater success,” said Bradley Bennett, divisional manager of Plug-Ins Electronix. “There was a very small gap between the Eid, GITEX and DSF promotions this year.” Many retailers are reportedly engaged in price wars to cash in on consumer demand for popular products such as LCD TVs and MP3 players, with some products priced at close to cost. “This year’s installment of DSF has proven a moderate success,” said Ashish Punjabi, COO of power retailer Jacky’s Electronics. “Fast moving CE goods such as digital cameras and MP3 players have again proven the most popular products, however intense competition among retailers selling these goods has diminished our margins significantly.” Bennett explained Plug-Ins Electronix had also accepted reduced margins in a bid to turnover stock this DSF. He claimed that retailers were closely eyeing their rivals’ movements in respect to the price positioning of certain products. “At one stage, we were having to amend the recommended retail prices of certain products on an almost daily basis,” he explained. “Retail prices never go up in the Dubai market and consumers have become conditioned to expect ever-decreasing price tags. They are very tech-savvy and constantly demand the best products at the most competitive prices. ” The current price war was also impacting vendors, according to Amit Vardhan, assistant general manager of Dubai-based consumer electronics group, Nikai. “Competition from the big businesses and cheaper LCD panel prices has meant that we have had to significantly reduce the price of our LCD TV range to turnover stock this DSF, ”he conceded. Tomio Isogai, managing director of Sharp Middle East FZE, said that the slim profit margins had impacted the company’s profit expectations this DSF. “Our 32-inch Aquos LCD TV has been selling well in the hypermarkets this DSF, where they’ve been priced at a little over US$800,” he said. “This is good news in terms of volumes, but the pricing strategy means we are working to the barest of margins.”

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