UAE tech fans forced to dig deep for Microsoft Surface

Retailers forced into grey market for supplies of Microsoft's new Surface tablet with customers willing to pay 50 per cent more

Customers are willing to pay more for grey market versions of the Microsoft Surface tablet. Bobby Yip / Reuters

Retailers have been forced to source Microsoft's new Surface tablet from the "grey" market as local customers pay almost 50 per cent more than its recommended price to get hold of one.

"Demand has been good, we ordered a small lot to begin with and it sold out. More is on the way," said Ashish Panjabi, the chief operating officer of Jacky's Electronics.

Microsoft launched its new Windows 8 Operating System across the traditional desktop platform, mobile phones and the tablet on October 26.

But while the mobile phones and desktops are available throughout the Middle East, the company has not disclosed a launch plan for the Surface in the Emirates.

"We want to do things when we are ready and have the right products set to make sure customers are happy," Gustavo Fuchs, the head of mobility at Microsoft Gulf told The National before the launch.

The local retailers Jacky's and Jumbo Electronics have sourced the tablet from the grey market to meet the demand.

Jumbo is retailing the Surface for Dh2,699 (US$734) with its original cover. The company is preparing to slash the price by about $100 at the end of this month for the stand-alone product without the cover.

"There has been a lot of hype and demand for the new platform. The grey market happens because of availability. If we do not go grey, we lose out on sales opportunities," said Nadeem Khanzadah, the head of retail at Jumbo.

Microsoft's recommended retail price (RRP) for the Surface is $499 for the basic model.

"I run a trading company and I wanted the Surface because it has all the Microsoft software, like Word and PowerPoint, this is important for my business and so I don't mind paying a little more," said one customer.

The legality of the grey market in the UAE is somewhat sketchy. Free-zone companies are permitted to import such products and resell them within a free zone without any trouble.

"Grey imports, also known as parallel imports, are products that have been manufactured and sold by the intellectual property rights holder in one country or region but then imported to another country without their consent," said Dino Wilkinson, a partner at the law firm Norton Rose.

Mobile devices have to be authorised by the Telecommunications Regulatory Authority before they can be officially sold here, but this is difficult to ensure on the grey market. The latest iPhone 5 is already available on the grey market. Du and Etisalat's decision to supply the nano sim cards for the phone was deemed a form of acknowledgement and validation before the official launch.

Often UAE customs authorities are known to be somewhat lax when it comes to checking whether the products are authorised for sale by the manufacturer or rights holder at the point of entry, which is why grey imports appear, says Mr Wilkinson.

"The market is substantial, but it is not always a bad thing. It is functioning in Dubai's role as a trading centre," said Matthew Reed, the principal analyst at the market research company Informa Telecoms and Media.

Generally products on the grey market are about 10 per cent cheaper, owing to the absence of customer care and warranties. In the exceptional circumstances however, prices can soar and fluctuate. In September the iPhone 5 reached Dh6,000 before dropping almost Dh2,000 only a few weeks later. Apple's RRP for the basic model is $799.

Technology spending per head in the Arabian Gulf is one of the highest in the world. Sales of consumer electronics in the UAE alone is expected to reach almost $4 billion by 2015, up 26 per cent in just four years.

With such a technology-hungry population, retailers are tempted to opt for the grey market when manufacturers fail to launch a product here. Jacky's decided to work with the grey market to meet demand for the iPad when it was launched first in the United States.

"We would rather go through the official channels, but if people are desperate enough and willing to pay ridiculous prices, then we will source it and sell it at a ridiculous price," said Mr Panjabi. "It is a question of supply and demand."