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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