Monday, August 1, 2011

Dubai’s beauty product imports reached AED 4.1 billion in 2010


Since 2003, imports have risen from AED 1.4 billion to AED
4.1 billion in 2010, reports a Dubai Chamber study
Spending on cosmetics and perfumes in the UAE is likely to be
worth AED 1.2 billion by 2014 which bodes well for the sector
Geographic location, increase in population and income
growth are cited as reasons for the progress of the beauty
products industry in Dubai

Dubai, UAE: A recent Dubai Chamber of Commerce and Industry

study indicates that consumer spending on cosmetics and

perfumes alone in the UAE is likely to be worth AED 1.2 billion

by 2014 which bodes well for the growth of the beauty products

industry.

The forecast, based on a report by Euromonitor International, a

world leader in consumer market research, states that Dubai’s

beauty products retail sector which has grown from AED 3 billion

in 2005 to AED 5.5 billion in 2010, registered a 13% per annum

growth rate.

Last May, Dubai hosted yet another successful Beautyworld

Middle East specialist exhibition which played host to over

700 exhibitors from 44 countries. The strong participation in

the exhibition is a testament to the growing regional market

registering nearly 10% growth in the number of exhibitors and

visitors from last year. The leading exhibition will be held next

year between May 29 and May 31.

According to the study, Dubai’s retail sector has experienced

a strong growth. Since 2003, imports of the Emirate’s beauty

products have risen from AED 1.4 billion (Figure 1) to AED 4.1

billion in 2010. Exports have also risen from AED 0.1 billion to

AED 0.4 billion.

The study attributes the trade growth partly to the two annual

shopping festivals such as the Dubai Shopping Festival (DSF),

held from January to February, and the Dubai Summer Surprises

(DSS) that runs from June to July, and directly contribute to the

annual sales trend.

Figure 1: Trade of beauty products in Dubai

beauty products: perfumes, lipstick, eye
make
-up, compressed powders, shampoos

Exports

Re-exports

Imports

AED bn

6

5

4

3

2

1

0

2010

2003

Source: Dubai Chamber based on Dubai Customs statistics

2004

2005

2006

2007

2008

2009

The enhanced sales growth is also accredited to duty-free sales

as Dubai is a strategic transit hub in the region connecting the

East with the West. According to a recent report by Oxford

Economics, a leading economic forecasting consultancy, tourism

is likely to continue to be one of the main drivers of Dubai’s

economic growth and its emergence as a global centre for

commerce and tourism.

Drivers of growth

The beauty industry, consisting of hair products, fragrances,

cosmetics and well-being products, is serving the retailers right

as it is hardly affected by the economic cycle. In the US, this

phenomenon is termed as the ‘lipstick effect’. As these products

are often considered a daily necessity they exhibit stable sales

and their spending patterns provide a reliable platform for

organic sales growth.

Closer home in the GCC, growth prospects for the sector are

amplified partly through the emerging population dynamics

of the young and yet sizeable growing middle income class.

According to the Economist Intelligence Unit forecasts, the GCC

population will reach 53 million by 2020. The young also spend

disproportionate amounts of income on beauty products and in

regions where incomes rise; disposable incomes tend to ebb from

purchasing necessities and flow into luxury products.

The Euromonitor research estimates that there are approximately

30,000 spas in the GCC and the figure is set to rise along with

population and income growth. The spa culture, attributed to the

strong growth of the sector, is also driven by the harsh climatic

conditions which contribute to the demand for hair and skin

products used as a protection against damage and dryness.

Highlighting Dubai’s status as a gateway to the region, the study

states that Dubai being a regional hub for re-exports is proving

to be a lucrative option for companies to connect to regional

markets where the untapped demand for beauty products can

lead to explosive sales growth.

products too remains high because they are light-weight in

distribution and durable for storage.

Also, profitability for beauty

Prospects

In light of the stupendous success of the Beautyworld exhibition,

traders feel that there is good potential for exploring the

untapped segments of the beauty products market. For example,

new areas of growth include targeting the ‘cosmopolitan’ man in

Dubai. Already, an array of beauty products aimed solely at men

who make up approximately three quarters of the population

has been emerging in the country. Meanwhile, regional growth

can be attributed to manufacturers who successfully tap ethnic

sensitivities where make-up or cosmetics are in synch with

traditional attire.

Also, a strong demand for green and natural products is expected

with the growth in eco-conscious consumerism.

the use of parabens, a common ingredient in shampoos and

moisturisers is frowned upon as manufacturers now expect this

sentiment to become a norm. Even demand for anti-ageing

products, which has witnessed a rise in the last few years, is

expected to continue in the coming years.

For example,

Challenges

The study also focuses on the challenges faced by the sector.

The first and most obvious challenge being the stiff competition

from product innovation as new entrants offer a wide choice of

products and resort to aggressive marketing to get noticed.

Also, beauty magazines routinely promote new products from

top brands with huge sums to spend on product launches

and advertisements. Earlier, this trend was seen as a barrier

for new-comers but the internet rating and recommendation

culture, adopted by a new generation of consumers, is making it

easier for new entrants to gain recognition and build up a loyal

customer base instantly.

However, beauty products are expected to meet the needs of

an ever conscious eco-oriented consumer. Recycled PET bottling

and ‘weightless’ biodegradable paraben-free dye and silicon-

free products are putting mild cost pressures on manufacturers

who stand to gain in the long term. For example, earlier this

year a leading French brand publicly announced a drive to help

reduce packaging waste and increase recycling through exclusive

partnerships with reprocessing specialists.

Over the long-term, established beauty products have a creeping

risk of product imitation as any other sector. In Dubai, this

risk can be circumvented by establishing effective distribution

channels and outlets. Smaller brands tend to sell their products

online through their own portals in order to market their products

alongside bigger brands through established channels.

The study concludes by stating that Dubai continues to be the

leading hub for marketing of beauty products. The increasing

number of visitors to the Beautyworld Middle East expo, for

example, demonstrates Dubai’s importance as a regional hub

for tapping vast opportunities available in the beauty products sector.

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