The rising commodity prices in Qatar have mostly been attributed to the skyrocketing rents of warehouses and other commercial properties.
However, there are other hidden factors influencing the pricing mechanism, say market sources.
Some wholesale distributors say they have been forced to increase the prices of many commodities due to additional costs imposed by some hypermarkets dominating the market. This increase is eventually passed on to consumers.
And retailers cite their increasing overheads, especially rents, to justify price increase.
In this blame game, the customer is the major loser.
When a new distributor wants to showcase his products in a leading hypermarket, he would be required to pay a huge sum as the cost of “vender listing”.
“If the distributor approaches a hypermarket, they may not even consider him in the first instance.
“After many visits and sittings, they would eventually agree to include him in their “vendor listing” provided the distributor pays a huge amount, which could go up to QR25,000 in case of leading outlets,” a wholesale foods distributor told this daily, requesting anonymity.
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But hypermarkets are not in a position to impose their terms on the established suppliers because they are already in the market and the retailers are heavily dependent on them. However, hypermarkets have allegedly invented ways to squeeze a new distributor for extra amount as the latter is looking for an entry into the market. And there is no shortage of such distributors flooding the market with new products every day.
If a distributor is included in the “vendor list”, the retailer (hypermarket) would agree to take a few of their products without any additional charges. However, if the distributor wants to sell more products, he would be required to pay extra for each item.
“Every product has a barcode and we are required to pay QR2,000 to QR3,000 extra for each. A distributor will have hundreds of products and only 10 or 15 are included in the “free” category. “Imagine how much these hypermarkets would be collecting from the distributors in this way,” said the distributor.
There is yet another levy called “rebate”, a discount the supplier is bound to offer on sales.
“Suppose we supply goods worth QR100,000 to a hypermarket, they would deduct up to 20 percent as commission. This is known as rebate,” said the distributor.
There are also special charges for reserving spaces in hypermarkets for special offers or to promote certain products.
To recover these additional costs, the distributor will raise the prices to make a comfortable profit.
“There is no doubt that hypermarkets are the biggest gainers. But I believe the high rents in Qatar are the major cause of the increasing commodity prices,” said another distributor.
About 70 percent of sales in the market are through hypermarkets and leading supermarkets, especially in case of food items, he said. “If we refuse to meet their demands, our goods will remain unsold.”
Some leading supermarkets follow hypermarkets in their own way, say sources.
“If a hypermarket charges QR3,000 for a barcode, a supermarket may charge QR300. This practice was introduced by hypermarkets,” said a distributor.
Denying allegations about their role in the price hike, hypermarket sources say only some small-scale distributors could complain about such extra charges.
They argue that there is nothing wrong or unusual in imposing such requirements on a new distributor and the practice has been existing in the market for long.
“Several new distributors are entering the market on a daily basis and badly need spaces to market their products. We cannot offer them free space, especially with our increasing operational costs.
“Some retailers would impose such requirements only to drive away a distributor,” said a senior official of a hypermarket.
He said many retailers are struggling to survive due to the stiff competition and strict regulations imposed by the authorities
Source: The Peninsula