Sue to the implementation of five percent of the VAT, UAE inhabitants have not cut down spending on food-related items and beverages. The sales remain robust, retailers and distributors.
At an event Gulfood at Dubai, retail industry executives stated they will try to absorb the mostly affects of VAT in order to keep customers satisfy and maintain a spot in the market. By doing so most of the retailers will make customers more confident. People reaction regarding the implementation of the tax in across the globe is generic as the time pass people start accepting it. Same is the case with UAE.
The UAE implemented five percent VAT on food and beverage items from 1st January 2018 as per agreement with its GCC. As the marketing strategy, major retailers announced about absorbing VAT to satisfy customers, on other hands some passed it on to consumers. In the start, it was somehow affecting the sale of franchises but now people started taking it as positively by knowing that VAT rate is very much less than other parts of the world. Indeed it is very nominal for consumer and retailer but it will help the UAE government to launch mega public projects without the help of external funds provider.
Profit VS VAT
Experts say that people believe that margins have been very high. This is the wrong concept. 90 percent of retailers are on a leasing rental basis. A few years back people starting buying outlet, franchises and started saving a little bit. The market is very competitive, six outlets will be operating in one small area and this was not the case in the past. Every investor or retailer doesn’t want to lose his customer and want to hold its customers because that’s why they can earn the profit in such tough competition. Margins are getting shrunk every day, sometimes they don’t even make two percent.
Another restaurant chain head also rejected the formula that impact of VAT will slow down their sale ratio as residents continue their regular foods and beverages purchases. In the start, it nominally affected the business but they will get better in 2018 as they have planned to bear Vat affects n their own rather than implementing that to the customer.
Partner at Al Maya Group, Usha Pagarani also denied any impact of VAT on sales, describing that it too low to affect. Further described his gratitude while welcoming VAT and saying that every country has VAT. However, Bhatia of Choithrams claimed that minor decline in beverages and energy drinks sales have noticed. He is quite hopeful that the phase will go away within three months. The decline in sales is seven to eight percent.