Global attention has been focused on Qatar which is a small but rich in Middle Eastern countries through 2022 World Cup. In fact, the Middle East cosmetics market has long been a blue ocean for consumer brands from all over the world, including cosmetics brands.
A report shows that the average Saudi Arabian woman spends $909 per year on cosmetics products. This figure is nearly double the $505 spent by British women and more than nine times the $100 spent by Chinese women. However, But what doesn’t match the world’s top national GDP and strong consumer demand is the underdeveloped consumer industry in the Middle East.
The Middle East cosmetics market is dominated by international brands, with brands from the UK, France, the US and Switzerland alone accounting for 84.5% of the market share, while local brands in the Middle East account for less than 10%, according to a 2022 report on beauty e-commerce in the Middle East published by analyst firm RetailX.
Crazy growth of e-commerce and cosmetics market
The term “Middle Eastern tycoons” is often used to refer to the six Gulf states, including Qatar.
The six Gulf states include the UAE, Oman, Bahrain, Qatar, Kuwait and Saudi Arabia. These countries rely on oil as the core economic pillar. According to IMF statistics for 2022, the per capita GDP of the six Gulf States in the Middle East is between $23,000 and $84,000.
Take Saudi Arabia, the largest of the six Gulf countries in terms of area, is the world’s largest oil exporter. According to 2019 data, oil accounts for 63% of Saudi Arabia’s entire national budget revenue and 45% of its gross domestic product. The manufacturing sector, on the other hand, accounts for less than 10% of the entire national economy, and most of it is heavy manufacturing, with basically all light industry relying on overseas imports.
However, consumer enthusiasm here has climbed year after year. The overall population of the Middle East is structurally young due to the rising number of young consumers. Between 60% and 80% of the country’s citizens are under 30 years old. In Saudi Arabia, for example, the average age of the nationals is only 31.8 years old. Saudi Arabia’s population under 15 years old accounts for about a quarter of the total population, and only 3.5% of those aged 65 years and above in the year 2021.
The rich young people have enough spending power in the Middle East cosmetics market. Meanwhile, Internet penetration in the Middle East has increased rapidly in recent years. According to Hootsuite data, 71% of Middle East users access the Internet via 3G/4G, and mobile Internet penetration reached a maximum of 90% in 2021.
The developed network infrastructure has made the Middle East a blue ocean for the e-commerce market. According to a BMI research report, the Middle East is currently one of the fastest growing e-commerce markets in the world. The overall growth rate of e-commerce in the Middle East has exceeded 30% in the past few years. By 2022, the Middle East e-commerce market is expected to reach $50 billion, almost half the size of the South Central Asia e-commerce market.
According to analysts RetailX, Internet users has risen to 90% in the six Middle Eastern countries they count (Iran, Israel, Qatar, Saudi Arabia, Turkey), 58% of which are online shoppers.
Internet users has risen to 90% in the six Middle Eastern countries
In recent years, due to the impact of the epidemic, the enthusiasm of Middle Eastern consumers to shop online has grown even more rapidly. RetailX data shows that in 2020, the growth of the e-commerce market in just three months is the same value as the growth of the past year.
The rapid development of e-commerce has been particularly favorable for businesses such as cosmetics. Women often have difficulty going out to shop due to the influence of local religious and cultural factors. Online shopping makes it easier for women to spend money at home. The general environment in the Middle East in the past few years has enabled women to gain more economic rights at the same time. All these has boosted the development of categories suitable for e-commerce, such as cosmetics and clothing.
In Saudi Arabia, the Saudi e-commerce market segmentation share is 58% for electronics, 37% for fashion products, 31% for beauty products and 29% for household appliances in the year 2021.
The structure of the beauty market in the Middle East is very distinctive
According to analysis of the cosmetics sector in several countries in the Middle East by analyst firm RetailX, personal care accounts for the largest share of the Middle East market, followed by the skin care sector. Fragrances account for a relatively high share of the Middle East market, almost equal to the color cosmetics category. In countries such as Turkey, fragrances account for more than color cosmetics.
The beauty market in the Middle East is still absolutely dominated by offline in terms of sales channels.The offline channel of beauty and personal care in Qatar will account for 85%, while the online channel will account for only 15% in 2021. Saudi Arabia’s offline channel accounts for 84%, and the online channel only accounts for 16%.
The online share of cosmetics in the Middle East remains low, even though the e-commerce market is growing rapidly. It may be influenced by the lagging logistics. Most cities in the Middle East are sparsely populated, with scattered orders and a natural landscape of mostly deserts and hills. This makes logistics costs high. According to media reports, sending a cell phone from Riyadh, Saudi Arabia to Jeddah, it may take three to five days, even more than half a month. The shipping fee is as high as 25$.
Address planning in the Middle East is unclear at the same time. There is no accurate planning of zip codes, subdivisions and door numbers which makes last-mile door-to-door delivery problematic.
The high cost of shipping fees coupled with the difficulty of picking up the goods affected by the high frequency of purchase, with the lower unit price of FMCG products.
As a result, the preferred shopping option for women in the Middle East continues to be large shopping malls. The traditional retail business in the Middle East also has its own unique ecology Most importanly, it is dominated by local business groups.
For example, Kuwait’s Alshaya Group operates several major shopping centers throughout the Middle East. The group also operates offline flagship stores on behalf of numerous industry brands, including cosmetics.
The Middle East has previously been known for its one-stop shopping and experiential shopping centers. For example, Qata is not as large as Beijing. However Qatar has more than a dozen giant shopping centers such as Mall of Qatar, Doha Festival City Mall, Villaggio which covers a large number of luxury brands.
There are several representative offline chains of cosmetics in the Middle East, including drugstore Care n Cure Pharmacy, cosmetics collection store Faces, and Meisam Atr, which operates a variety of perfume and beauty stores.
In terms of online channels, the current online platforms in the Middle East mainly include Amazon’s Souq, the local platform Huda beauty, which has risen in recent years, as well as SHEIN and Alibaba Express.
The cosmetics market in the Middle East is dominated by major European and American brands.
Signal and Dove are the best-selling brands in Saudi Arabia in the personal care market. Nivea is the skincare brand with the largest share in the UAE. Brands such as MAC, L’Oreal, Chanel and Myo Paris, account for a relatively large share of the market in the Middle East In the color cosmetics sector.
In addition to the big international brands, some local brands are also emerging in the Middle East. Many of these local brands have developed by becoming local distributors and franchise partners of major international brands.
For example, Chalhoub Group, a franchisee of several brands such as L’Occitane, Make Up for Ever and Dior, is also the owner of the aforementioned retail chain Faces. Chalhoub Group has developed its own cosmetics brand “Wow Beauty Forward”.
In addition, Huda Beauty and Shade M, also have a similar line of business. They started out as a channel as a big brand agency, and then launched independent brands.
Middle Eastern countries have strong consumption power, but the high-end expensive market is still firmly monopolized by the international big brands. There are also companies that are targeting another huge market in the Middle East, namely the fragrance market.
The Middle East fragrance market is similar in size to the color cosmetics. Consumer demand for color cosmetics has weakened due to the epidemic. Demand for fragrances has further increased. Sales of fragrances and related goods in the Middle East surged 700% after the epidemic.
However, it is not easy to enter the perfume fragrance market. The fragrance market in the Middle East is extremely well developed. Not only is there a strong demand for fragrance, but some countries in the Middle East, such as the United Arab Emirates, are also important exporters of fragrance materials. The Middle East prefers strong perfumes which are generally 20%-30% fragrance content because of regional customs.
Some companies choose to start with home instruments such as aromatherapy machines in order to avoid perfume product competition.
The Middle East remains a fast-growing and opportunity-filled market, and e-commerce is an opportunity to enter this blue ocean.
Companies need to further strengthen their knowledge and communication with local consumers in the Middle East. Some companies with strong cross-border capabilities have started to build social platforms and online marketing networks in the Middle East.