It still makes scents
Despite a dip in sales triggered by responsible buying, perfume traders in the UAE are upbeat and expect a turnaround this September
The local perfume market thrives on the fact that nobody wears perfumes better than the Arabs do — be it oriental or western fragrances. The Arabs are considered to have the highest per-capita consumption in perfumes as they have a long cultural connection to fragrance that goes beyond beauty. The region’s hot climate, which stays above 40-degree centigrade in summer, encourages consumers to maintain high levels of personal hygiene, and fragrances enables them to support them. Emirati Fahad Abdullah said: “We Arabs cannot survive without fragrances. For us it is not necessary that we use Western scent, we have our own ‘Bukhoor” (handmade incense made fragrant woods, spices and natural oils.) You get the best ones in from Yemen. I travel to London quite often and get most of my Western perfumes from there. It has nothing to do with prices. If it’s a good scent we Arabs buy it, even if it comes as cheap as Dh50.” But, regional retailers and distributors of fragrances in the UAE are currently feeling the pinch of up to 20 per cent decline in sales due to a slowdown in global economy and a decline in high-spend Chinese and Russian tourists who are among leading buyers in addition to the Arabs. Some industry players blame a 20-30 per cent rise in rentals at prime mall locations for their shrinking revenues and profits. According to them, buyers have cut down their spending on perfumes by around 50 per cent. (Unable to attribute any specific group or person on sales decline and rentals as no one is willing to come on record) The retailers and distributors, who spoke to Khaleej Times, were of the opinion that on an individual basis GCC nationals have a huge appetite for perfumes and fragrances, but there is a shift in the consumer buying habits. “People have moved from impulsive buying to responsible buying. Like for example an individual who used to buy five bottles of fragrances are now opting to buy only one or two bottles. This has also impacted the market,” said Vinod Adnani, chief executive at Multifelx International and Retailers Exquisite, who have been in this business for the last 23 years. “I used to splash on perfumes, but in the last couple of months I have shifted from buying high-end brands priced at Dh350-Dh600 to fragrances that are priced at Dh165, because we are in times where saving is more essential than impulse buying,” said Wafa Hassan, a Jordanian. “When it comes to budgeting your expenses, non-essential and cosmetics are always on the chopping list. Instead of buying Western perfumes from high-end shops in malls, I have opted to go for scented oils that cost me Dh100 to Dh150 at a local perfumer shop in a souq,” said Rabaa Mahmoud, an Egyptian. However, there are buyers like Abhisha Patel, an Indian, who will not compromise on their favourite brands. “I can never compromise on the brand of perfumes I buy. My favourite is Channel and Doir. I usually get my stock of perfumes from the Duty Free as I travel a lot,” said Patel.
Temporary phenomenon
Meanwhile, industry stakeholders consider the dip in their business a temporary phenomenon and say the perfume industry still holds considerbale growth potential in medium to long term. Referring to Euromonitor International data, they say per capita spend on fragrances in the UAE and Saudi Arabia are expected to reach $34.90 and $49.10 respectively, by 2017 compared to $21.30 and $34.40 respectively three years back in 2012. Euromonitor International estimated that the fragrance market in the Middle East and Africa registered seven per cent growth year on year and estimated at $5.2 billion last year with Saudi Arabia ($1.7 billion) and the UAE ($423 million) emerging as leading players in the Gulf region.
Hussein Adam Ali, chairman of Swiss Arabian Perfumes Group, expressed full trust in the industry’s ability to rebound and said the outlook remains promising.
“Despite difficult market conditions, we have full trust in the government’s consistent policies and stable market conditions in the country. We are here to stay longer and the industry has promising outlook,” Ali told Khaleej Times.
Ahmed Pauwels, CEO of Messe Frankfurt Middle East, the organiser of recently concluded Beautyworld Middle East 2016, echoed similar views and said developing markets such as the Middle East will benefit from favourable macroeconomic factors, where rising disposable incomes and stronger purchasing power will, in turn, spur growth in discretionary purchases including fragrances.
Adnani of Multifelx International was also upbeat that the market will witness at upturn in six months. “We are in the business of Fast Moving Consumer Goods (FMCG) where our products price range is between Dh5 and Dh50. When such kind of situation lingers, where the economy is going a bit down around the Middle East or around the globe, people who are using expensive products move down to our products which are reasonably priced, although they come from countries like the UK, Germany, Italy, France, Spain and South Africa.”
“In distribution, we are still able to manage our business at more like a flat and plus two or three per cent, but in retail, we have seen a shift where we carry brands from a price range of Dh50 to Dh500. People, who used to buy Dh400 to Dh500 fragrance, now prefer to buy something below Dh200.”
“I am positive that we will be seeing an upturn starting from this September onwards. We must also keep in mind that the lean summer has begun, the holy month of Ramadan is round the corner, and an estimated 50 to 60 per cent people will be heading for their holidays. When they return, it will be the back-to-school season which will trigger the market to do better,” Adnani said.
Elaborating, he said the UAE in general and Dubai in particular has always been able to spread cheer in the times of gloom with major infrastructural projects and expansions. As per the latest data, contracts worth $36 billion for different projects in the UAE will be awarded this year that will help boost the general economy.
“There is a positive air around. With the investments that Dubai and Abu Dhabi have made in the fields of infrastructure and tourism, we are expecting that traction to come in the beginning of 2017 and we should see a very healthy sign of growth leading up to 2020-22. We have Expo 2020 coming up, Emirates is expanding its network so they are going to get a lot of people coming through Dubai, although majority of them will be transiting, so everybody in the market is waiting patiently for the crisis to roll over, but at the same time we are quite sure.”
Ups and downs
Perfumes remained the highest selling category at Dubai Duty Free shops across both Dubai International and at Al Maktoum International with annual sales topping $311.58 million, representing 16.50 per cent of total $1.933 billion annual sales in 2015.
“I have been living in Dubai for the last 48 years and I have seen the emirate from zero to what it is today. We have seen all the ups and downs of the world’s economies around us and at the same time Dubai has been blessed with something or the other since the year 1980s,” Adnani said.
Agreeing to what Adnani had to say, Anupam Saxena, CEO at Truelucent International, a regional distribution company of perfumes and luxury products, said the perfume and cosmetics market is currently witnessing a slowdown. [He didn’t comment on high-end brands]
“Obviously people are being cautious in terms of where and how much money they are spending. Perfumes being as a non-essential, feel good product people tend to consume it when they are psychologically upbeat, as they want to relish themselves in luxury. The war in Yemen, for example, is also a contributing factor and it has been playing on people’s mind in the recent past. So there has been a kind of a dullness that does not foster consumption.”
“Apart from that I would say that generally the retail market in the UAE gets fostered by tourist or the transient traffic which includes people coming for pleasure and those coming here for business. To a certain extent that traffic has been impacted due to the worldwide economic slowdown.”
According to Saxena, the perfume market is currently going through a 20 per cent decline.
“Nobody would share the exact numbers. I am talking about selective fragrances whether local or imported, something that has a retail price say above $75-80. But, having said that, the UAE — and Dubai in particular — has always remained upbeat and has been able to turn the tide in building a more robust economy that will ultimately benefit other sectors, including the perfume market,” he said.
sunita@khaleejtimes.com
Despite difficult market conditions, we have full trust in the government’s consistent policies and stable market conditions in the country. We are here to stay longer and the industry has promising outlook.” Hussein Adam Ali, chairman of Swiss Arabian Perfumes Group
I am positive that we will be seeing an upturn starting this September onwards.” Vinod Adnani, chief executive at Multifelx International and Retailers Exquisite
The UAE — and Dubai in particular — has always remained upbeat and has been able to turn the tide in building a more robust economy Anupam Saxena, CEO at Truelucent International
We Arabs cannot survive without fragrances. For us it is not necessary that we use Western scent. It has nothing to do with prices. If it’s a good scent we Arabs buy it, even if it comes as cheap as Dh50.” Fahad Abdullah, an Emirati buyer