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Premium Positioning; Innovative Retail Hallmarks of Middle East Beauty Market

By: Gayatri Bhasin, Euromonitor International
Posted: November 5, 2010, from the November 2010 issue of GCI Magazine.

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Premiumization has also been a key trend in the UAE. While it was expected that a period of economic difficulty would signal a sharp shift away from this trend, it has proved more resistant. Fragrances and color cosmetics are the two categories with significant shares for premium products. The share held by premium fragrances remained stable in 2009, at 72% of value sales. Fragrances is mainly driven by premium products, which is why it is one of the most significant categories in beauty, and this position was sustained throughout the financial instability of 2008 and 2009. The share of premium color cosmetics fell by one percentage point to 45% in 2009, which is still higher than the average split between premium and mass products 2004–2009. It is increasingly evident that premium beauty products are considered an affordable luxury by women who may be willing to spend that little bit extra on a fragrance or a lipstick while foregoing a new outfit or piece of furniture, which would represent a much bigger overall spend.

Expanding Retail Landscape

Both premiumization and the dominance of multinational brands are being aided by the expanding retailing landscape in the UAE, which is becoming more innovative in an effort to maintain consumer interest. Beiersdorf consolidated its position in the market over the last few years by opening Nivea Haus in Dubai at the end of 2008, a spa that uses only Nivea products for various pampering and healing treatments and also allows clients to purchase their Nivea products on-site. A unique concept for a mass brand, this has increased the brand equity and visibility of Nivea in the UAE.

Major department stores such as Harvey Nichols and Debenhams, and specialist beauty retailers such as Faces and Paris Gallery also play a significant role in beauty sales, particularly with regard to fragrances. These stores post a weekly ranking of the top 10 best-selling women’s fragrances. The list appears on a special stand with a tester for each brand next to its ranking, gently encouraging shoppers to try them. Other than these specific concepts, the retailing landscape in the UAE in general lends itself to promoting beauty care sales, with several malls across the country offering department and specialist beauty stores. Visiting these is one of the main pastimes of most residents and tourist alike.

Immediate Outlook

Although growth of beauty in the UAE weakened considerably in 2009, it still remained relatively healthy largely due to factors like premiumization and the expanding and increasingly innovative landscape that continued to fuel demand despite the financial crisis. It remains to be seen whether fragrances, skin care and the like can continue to weather the storm in 2010 as financial constraints increase for consumers, retailers and brands alike. It is likely that even the more resilient categories of fragrances and color cosmetics will face more severe challenges for the remainder of 2010 as consumers continue to tighten their belts and brand owners and retailers are unable to offer more attractive prices. According to Euromonitor research statistics, it is likely that countries such as Iran and Saudi Arabia will outpace the UAE in terms of growth, fuelled by larger populations and more diversified economies.

Gayatri Bhasin is a Middle East research analyst for Euromonitor International.