Having discussed this with numerous people on numerous occasions – most will conclude that Kuwait has a very over priced consumer market when compared to our European and Stateside ‘Neighbours.’
But why? It must be the sky high ‘operational costs right? Err….Nope….Let’s examine the basic facts:
- Cost of living here is relatively cheap
- we have no taxes on income
- we have a minuscule 5% import tax on goods arriving from overseas
- we employ cheap labour forces
- we have access to cheap fuel
In Reality, the only thing which could be deemed ‘expensive’ are the rents – which incidentally are still reasonably priced per sqm when compared with other large cities. So again, I have to ask why is Kuwait so expensive for consumer goods?
Here are the basic assumptions which I have derived:
a) Monopolistic Market Characteristics: In Kuwait, people take established ‘brand-names’ on an ‘exclusive’ basis whereby they become an ‘agent’ for the International mother company.
Whereas in Europe or the US anyone can become a McDonald’s franchise owner – in Kuwait (typically) only one person controls the entire market for that product. Let’s not single out McDonald’s here – the same goes for all Cars, Food and Electronic items.
So it’s Lucky for the owner – but unlucky for us, the consumer.
The Agent is thereby authorized to put any desired markups on products which typically far exceed the manufacturer’s recommended retail prices.
Well we do have a few choices don’t we? I mean we can go to another store and buy our ‘Sony’ DVD player right?
Kind of true, but when you see that the prices are very similar (because remember the agent is controlling the supply) – then things start to become decidedly frustrating for the consumer.
So what options do we have other than looking for another brand?
Well, we could buy off of the ‘Grey Market’ (non authorized dealer) but as I can tell you from experience, this can be a painful issue should anything happen to your ‘non-authorized’ unit. Taking a ‘grey’ unit to the dealer is as worthwhile as taking in a different brand altogether.
b) Pure Greed: Long established companies, who have had an agency for many years, quite frankly, don’t care what we the consumer think of their prices. As far as they are concerned – we can pay the price on the sticker – or we can get out and find something else.
Owners have already milked enough money from their brand to cover all their expenses and their initial investments – so to them, it’s just another sale…..
The ‘hot brands’ are especially easy to maintain and subsequently abuse due to the elaborate amounts of R&D capital reinvested by the International Mother company per annum. This is to ensure that their designs /technology stay ahead of the chasing pack for the following season.
In all cases there is not much good news for the average consumer and the archaic problem of overpricing in Kuwait is unlikely to end anytime soon.
So is there a solution? Well yes, but it’s a long shot….perhaps I should rephrase that – a very long, long, extra long shot.
Only when the Government interferes and abolishes Monopoly ownership OR the consumer collaborates through mass boycotting (example: use International Internet Services) will we finally see prices drift down to more ‘worldly’ acceptable levels.
Of course, there is another slight problem…..It’s not so easy to order your favorite Big Mac and Fries via FedEx now is it?