Lower prices not really a win-win for all retailers

The UAE’s brick-and-mortar retailers shouldn’t react to every discount offer they see in their online competition. “Cutting prices as an instant reaction can be so self-defeating,” said V. Nandakumar, chief communications officer at Lulu Group. “Physical retailers cannot go about winning the online retail wars playing the game the way etailers do. Shoppers need to be reminded that there are many other reasons why they should shop at physical stores, not just discounts,” he added.

It took time, but the UAE’s brick-and-mortar retail sector is by and large veering away from trying to match each discount with another, except during set promotions and end-of-year sales hijinks.

According to industry sources, the average selling price across key categories have not tumbled despite the number of discounts offered online. Sure, there are exceptions such as on television sets, but that’s more because of the maturing of existing technologies such as OLED, which has brought down prices of TV sets. In categories such as smartphones, manufacturers had taken corrective measures to put out higher-priced models.

“Despite the intense competition between offline and online retail, prices have held up,” said a market source. “Because there’s a danger that if price cuts and discounts were the only way people could be made to buy, it would have repercussions for the sector later on. That has to be avoided. Online retailers have been getting away with sourcing from outside the country and then managing to sell at a markdown price compared to the official price.”

And retailers need to stop being fixated about selling out on preset Fridays as the only way to inject shopper demand.

In a mailer, Carrefour came out with this nice line: “Forget Fridays! We have knockout deals”.

There’s a message in that for all UAE retailers. Get the product and price mix right, then it will find a buyer. Day in and day out.