UAE consumers can expect better prices on European goods as the weak euro enables retailers to import goods for less and pass on the savings. The value of the euro has dropped nearly 20 per cent against the dollar over the past six months, largely because of sovereign debt worries with Greece and other euro-zone countries.
Keith Flanagan, the general manager of Al Ghurair Retail, a Dubai-based company that manages brands such as Springfields clothing, said: "You'll see retailers passing the savings on to the consumers, either in terms of lower initial prices or better discounts when they go on sale. "They will also pass it on in terms of tangible benefits. You'll see a lot of shops being spruced up." On January 1, the euro was worth US$1.43. By June 7, the currency hit a low of $1.19, a 17 per cent drop. It was trading at about $1.23 late yesterday.
But this has helped to boost retail margins, said Shuja Jashanmal, the chief executive of Beautybay, a chain of cosmetic stores under the Landmark Group, based in Dubai. For the 10 per cent of its products it sources directly from European suppliers, Beautybay has seen its initial margins rise by between 10 and 15 per cent. Now it is passing on savings and has lowered its prices, Mr Jashanmal said.
"I've actually dropped the prices, making the brand more competitive," he said. "I have actually seen a significant increase in the selling of the products." It is a much-needed break after a difficult year for retailers in the UAE and globally. As consumers cut back on unnecessary spending, retail sales have slowed, forcing shops to push harder to make sales. "Almost every retailer is on sale three, four times a year. Competition is very tough," said Mr Jashanmal. "My competitors have also felt the pinch with the challenging economic situation and they are also doing a lot of discounting and promotions that they wouldn't have done two years ago."
But the weak euro also has drawbacks for retailers. European tourists are less likely to take holidays and shop in the Emirates if their currency does not buy as much as it once did. "The weaker euro doesn't help in getting a lot of tourists," said Nilesh Ved, the chairman of Apparel Group, which has brands including Aldo and Aeropostale. "Now it is more expensive to come to Dubai than go to European countries."
Tudor Allin-Khan, an economist at HC Brokerage, said last week that many travellers from Europe probably booked their vacations earlier in the year, so they would still come. Hotel rates had also been reduced, he said. But they may shop less while in the country due to their diminished spending power, Mr Allin-Khan said. Mr Flanagan said, however, that the positives outweighed the drawbacks. "[It] is certainly going to ease inflation here, as people won't be forced to put prices up," he said. "It will also have the effect of rather than just breaking even, helping to give that little bit of profit that is needed to start investing in the business."
aligaya@thenational.ae