Escalating oil prices, a booming tourist trade and rising incomes (tax-free, to boot) have made this middle eastern emirate a haven for beauty.
With the extraordinary growth rate of its economy, population and infrastructure, Dubai has become a veritable oasis for beauty companies. As the price of oil nears $100 a barrel and tourism flourishes, sales of beauty products have skyrocketed 82 percent from 2001 to 2006, according to Euromonitor International, with a compound annual growth rate of almost 13 percent.
The figure is even more extraordinary, considering Dubai— one of seven emirates that make up the United Arab Emirates—is a city of about 1.4 million, about 25 percent of whom are women. Some 65 percent of its population is between the ages of 20 and 40.
Although the population numbers are small, the sales figures aren’t. According to Euromonitor, the cosmetics and toiletries market of the UAE in 2007 was valued at $725 million. Of that, fragrances accounted for $159 million, hair care $142 million, color cosmetics $91 million and skin care $85 million. Bath and shower products had sales of $78 million, while men’s products reached $39 million. Dubai, the major hub in the UAE for beauty retailing, accounts for an estimated 70 percent of the UAE total.
“Dubai being the capital of superlatives, it seems that nothing is too good, rich, big or expensive when it comes to beauty,” says Didier Picard, general manager of the Estée Lauder Cos. in the Middle East. “Exclusivity is a big buzz word. The large, nonworking female community is looking for entertainment, spas, beauty classes, [wellness] care and various forms of body treatments.”
While about 80 percent of Dubai’s beauty consumers are either local nationals or expatriates, the number of tourists has been rising dramatically. Strategically located, Dubai attracts visitors from India, the Middle East and Europe, especially Russians, who spend in large amounts. With events and trade shows such as the Dubai Shopping Festival and BeautyWorld Middle East, the city is attracting tourists and traders alike.
Official statistics state that 3.5 million visitors attended the 45-day DSF in 2006-2007 and spent over $2.7 billion.
Overall, the beauty market is divided into luxury and mass channels, both of which are growing at about 10 to 15 percent a year, according to David Vercruysse, general manager of the luxury retail Chalhoub Group. “The market is changing at a fast pace from traditional souk [local shops in the market] to organized retail [beauty chain stores mostly in malls],” adds his colleague Raffi Fattal, chief operating officer, regional distribution, of Chalhoub Group Dubai. “The souk is considered an unreliable place to buy from as the retailers just stock and sell, whereas with organized retailers, money and time are invested to make it grow and take care of it.”
Chalhoub owns one of Dubai’s leading luxury beauty chains, called Faces, which is posting growth of 55 percent in the UAE overall, according to Vercruysse. Chalhoub also has distribution joint ventures with Coty, Markwins International, Puig Group and Christian Dior Parfums, accounting for about 35 percent of total market share regionally. Other key luxury retailers include the specialty chains Areej and Paris Gallery, as well as Saks Fifth Avenue, Debenhams and Harvey Nichols.
Within the prestige market, fragrances account for 70 percent of all purchases, color cosmetics 20 percent and skin care 10 percent, says Vercruysse.
“Historically, the idea of beauty and beauty products is based more on color and fragrances, hence the biggest categories are makeup and perfumes,” says Fattal. “In terms of growth, skin care is the fastest growing segment as the consumer is increasingly sophisticated and is open to new products, as opposed to Saudi Arabia, which is a very large but extremely conservative market….Here the local Arab women are the biggest buyers of fragrances and makeup and it is the expatriates who are more into skin care products.”
In the mass market, the primary retail channels are hypermarkets, most notably Carrefour, local supermarket chains, pharmacies and small independent grocery outlets. “The [retail store] trade is the fastest growing, estimated at about 30 percent in Dubai; this accounts for 70 to 75 percent of the total beauty retail market,” says Prashant Agarwal, marketing manager, consumer products, Himalaya Herbals, which makes skin and hair care. “The smaller unorganized retailers such as the grocery stores are slowly shutting down due to the rise in modern trade.”
Key brand players include market leader Beiersdorf, Himalaya Herbals, Neutrogena, Unilever, Procter & Gamble and L’Oréal. Like the luxury market, the fastest growing category in mass is skin care. Spas are also increasingly popular, a trend Nivea has jumped on. The brand recently converted a 30-foot bus into a mobile spa, offering facials, melanin testing, makeovers and even a nail bar. Later this year, it will open a Nivea House Spa in the new Dubai Mall.
Despite the dizzying sales increases, there are barriers to growth. In the mass market, convincing consumers to try a new brand is challenging.
“There are over 140 nationalities in Dubai, and almost everyone can get their favorite product of their home country here,” says Agarwal. “We’re not only competing with the known international brands but also with brands from all over the world.”
In the luxury market, recruitment is a challenge. “The problem we face is finding the right candidates for the job of beauty advisor and training them,” says Vercruysse. “We’ve set up a retail academy. It takes three to six months to train the staff, and sometimes they decide to leave after they’re trained. To deal with this, we make sure the pay packet is on par with or better than what the industry is paying.”
The quest for sales associates is only expected to heat up as the number of stores and malls proliferates. Currently under construction, the Dubai Mall, located next to the Burj Dubai (the world’s tallest building), will have eight multibrand beauty chain stores, plus a number of independent retailers. “Between 2007 and 2009, the retail scene will have added 15 to 20 multibrand cosmetics stores in at least five main malls,” says Lauder’s Picard. “Last year has seen the launch of Sephora in the Middle East. The retail scene should see further evolutions when more international players enter the market in the coming years,” he adds, alluding to reports that Galeries Lafayette, Bloomingdale’s and Douglas are all looking to expand.
A strong economy, infrastructure, tourism and incomes (which are tax-free in Dubai)—all bode well for the continued growth of the category. Euromonitor forecasts that beauty sales for the UAE will exceed $900 million by 2010, with makeup and skin care increasing by 50 percent and 55 percent, respectively. “As the economy is booming, the population is increasing, and with that the construction of malls and other structures is increasing,” says Fattal. “There are two ways to look at it: The pessimists will say this will not last for long, saying how many malls will there be or how long will the economy keep booming? However, we believe that we have many bright years ahead of us before we reach saturation.
2007 United Arab emirates Beauty/Toiletries Sales: $725 million
1. Fragrance: $159 million 2. Hair Care: $142 million 3. Color Cosmetics: $91 million 4. Skin Care: $85 million
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