UAE. Abu Dhabi Duty Free (ADDF) has stepped up the pressure for beauty houses to gain control over their domestic market pricing.
In a statement, the retailer claimed that local domestic prices in one major UAE chain are consistently undercutting duty free price points – and damaging the credibility of the duty free channel.
Deputy Managing Director Dan Cappell told The Moodie Report that the retailer wrote to 15 leading houses on 13 July, complete with samples purchased from the UAE domestic market and related till receipts.
He said that ten companies had replied, but not one had indicated that any action would be taken to address the fact that “products are being sold at either parity or less than our cost of goods in a chain of outlets in the domestic market.”
ADDF said that wherever such goods are coming from – whether through official or unofficial channels – the resultant pricing anomalies are unacceptable. Cappell commented: “The criteria that this category abides by – and dictates to the retailer – is to establish an agreed differential between the domestic market SSP [suggested selling price] and the duty free/travel retail SSP.
“In our case this is between -15% and -20%.This is based on an agreed margin for the duty free retailer based on the terms that are dictated by the houses. Any variation by the travel retailer in the SSP runs the risk of non-supply of goods. In other words, if we decided to lower our price to compete with the domestic market, we could be refused supply.”
ABU DHABI DUTY FREE PRICE COMPARISON WITH RETAILER X* LOCAL MARKET PRICES | |||
| PRODUCT | ADDF Price | Local Market Retailer X* | Local Market Retailer X* |
in UAE Dirhams | 12 July in UAE Dirhams | 31 August in UAE Dirhams | |
| ESTEE LAUDER EDP SPRAY 100 ML | 215.00 | 155.00 | 160.00 |
| CLINIQUE HAPPY HEART PERFUME SPRAY 100 ML | 235.00 | 165.00 | 150.00 |
| ARDENBEAUTY EDP SPRAY 100 ML | 305.00 | 75.00 | 65.00 |
| DAVIDOFF COOL WATER EDT 125 ML SPRAY | 170.00 | 95.00 | 90.00 |
| BOSS HUGO EDT SPRAY 150 ML | 150.00 | 100.00 | 95.00 |
| J’ADORE EDP SPRAY 100 ML | 275.00 | 165.00 | 160.00 |
| DIOR HIGHER ENERGY EDT SPRAY 100 ML | 200.00 | 145.00 | 130.00 |
| KENZO PARFUM D’ETE SPRAY 100 ML | 245.00 | 100.00 | 105.00 |
| GUERLAIN L’INSTANT EDP 80 ML | 275.00 | 145.00 | 135.00 |
| CK TRUTH EDP 100 ML | 210.00 | 75.00 | (NOT PURCHASED) 105.00 |
| GIVENCHY POUR HOMME EDT 100 ML | 185.00 | 100.00 | 90.00 |
| YSL OPIUM EDT 100 ML | 315.00 | 160.00 | 150.00 |
| GUCCI EDP II 50 ML | 180.00 | 130.00 | 130.00 |
| LANCOME MIRACLE EDP 100 ML | 230.00 | 170.00 | 180.00 |
| CARTIER DECLARATION 100 ML | 190.00 | 115.00 | 120.00 |
| CH 212 MEN EDT 100 ML | 180.00 | 115.00 | 120.00 |
| Total Basket | 12 July | 31 August | |
16 Products | 15 Products | 15 Products | |
| ADDF | 3,560.00 | 3,350.00 | 3,350.00 |
Retailer X* | 2,010.00 | 1,935.00 | 1,880.00 |
| UAE Dirhams difference | 1,550.00 | 1,415.00 | 1,470.00 |
There lays the key issue, Cappell said. “The lack of any action within the domestic market calls into question the category’s ability to manage its own terms and conditions,” he commented. “How can we justify [our prices] to a customer who comes into our store and asks why our “˜duty free’ product costs US$20 more than exactly the same item on sale downtown?”
ADDF insisted its sole objective in raising the issue is to find an amicable solution for all parties. But, added Cappell, “The general response to date can be summed up like this. “˜Sadly we cannot trace the goods. Our official distributor is not selling these products. We are taking this issue very seriously and will get back to you’.”
He added: “Not one response has referred to the pricing issue, and the consumer perception that ADDF is ripping consumers off – which, based on the retail prices shown, we are.”
ADDF said it has invited the supply companies to come to Abu Dhabi and visit the chain of shops. Only one has done so. “All products – with the exception of one SKU (now out of stock) that we purchased on 13 July – are still available today, cheaper than duty free, in a chain of seven outlets in Abu Dhabi. It is clear that these prices are below the RRP that ADDF applies, based on the retail pricing dictated by the houses.”
The retailer said it will now increase the spotlight on this issue. “We have contacted the Chamber of Commerce highlighting our concerns over the potential “˜Grey Market’ activity within the domestic market, and officially requested their support in establishing the source,” it said.
“We are also raising this at the highest level of group management with each house/brand requesting face to face meetings to find a solution to this problem. Only one supplier – a regional manager – has followed up with a face to face meeting with ADDF management since the original letters went out on 13 July.”
NOTE: Not surprisingly, The Moodie Report has received considerable feedback on this story, which we broke originally on 9 August. We will publish any responses, within the usual guidelines of fairness and legality. Names must be supplied though they can be withheld from publication by request.
King Power Group General Manager Merchandise and Operations Sunil Tuli writes: “I just the read the quote from Dan Cappell on the perfume pricing in the Middle East. He is right, but the fact is that the parallel market prices are not controlled by the suppliers at all.
“In fact, I had a meeting with Nestlé last week, and spoke of them having the same pricing policy for the same airport for all the different operators. The answer was that as a brand, Nestlé will not and cannot control retail pricing. If such a powerful brand cannot do that in a controlled environment like an airport, with its own direct customers, how can one expect to have ‘discount stores’ prices being regulated?”
*Retailer X is a chain of UAE stores; real prices are quoted.
Retail price source: Abu Dhabi Duty Free
