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Retail in Ramadan

Retail in Ramadan

Most of us can appreciate the fundamentals of supply and demand – until the goods in question are our kitchen staples, that is.

July 15, 2010 3:53 by



In the case where goods come to market through a limited number of agents – or in some cases, a sole agent – supply and demand is subject to an additional constraint: the greed of the agent. Without competition from multiple dealers, consumers do not benefit from the natural downward price pressures that are present in a competitive marketplace. The rules of engagement we learned in Econ 101 no longer apply.

The problem was perfectly illustrated this week as local media carried reports of traders collaborating to “hoard essential commodities [and, thus] create an artificial price rise in the Saudi market in the coming weeks prior to Ramadan.” Economic consultant, Khaled Al-Homaidan, suggested the situation may produce a near doubling in the current rate of inflation. “Earlier, high inflation was talked about as an imported phenomenon in the Kingdom. But the present situation is the result of a few individuals monopolizing the local distribution networks,” he said.

Al-Riyadh Arabic daily reported that two trading companies have amassed stockpiles of key food stuffs, ahead of the Ramadan buying season. The importers are alleged to have benefitted from the strong Saudi riyal against the weakened euro, in the purchase of bulk stocks of key commodities.

Fortunately government officials in the region have been quick to act. Last month, retailers in the UAE met with consumer protection officials regarding the need to ensure market stability during Ramadan. And reports say that the director of the Consumer Protection department assured consumers that the ministry “was committed to ensuring that essential commodities are not hoarded or their prices manipulated” and that complaints against rogue retailers would be dealt with swiftly. Qatari officials have also responded to the threat of the pre-Ramadan price hike by ordering fixed prices on scores of food and non-food items earlier this month.

But despite official moves to allay fears of consumers, allegations of price hikes continue to make headlines. The CEO of Spinney’s Group denied this week any attempt to take advantage of increased demand during Ramadan, blaming any price hikes on suppliers, not the retailers.

In the end, consumers may have to wield their considerable power to keep retailers in line. Customer loyalty and repeat business are the life blood of retail. Shoppers should remind the stores they patronize that outlandish price hikes will certainly represent a betrayal of that hard won loyalty. And this is a message that retailers should pass on to their suppliers, as well.



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1 Comment

  1. in UAE on July 27, 2010 8:59 am

    It seems all the artificial price hikes in rent in the last few years were accepted as a matter of supply and demand, even though many units were held from the market to increase the image of low supply.. same applies here, but I think its a different group of people are going to suffer on this one, so lets see what happens

     

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