Beauty tech boom: A look inside the future of the $32 billion Middle East beauty industry

Masks and make-up don’t really go hand-in-hand right? Despite that, the Middle East and Africa’s beauty and personal care industry is forecast to grow from $32 billion as of 2020 to $39 billion by 2025. What is going to fuel the growth of the beauty industry and what elements are going to ensure the immediate recovery of the market?

‘When you look good, you feel good’ is something that consumers in the UAE specifically have seemed to abide by. Cosmetics and beauty as a segment of retail found its safe haven in this region a couple of decades ago when global giants such as Mac, L’Oreal, and Lancome started stepping foot into the market. Slowly but steadily, with the increased penetration of the internet, another wave took over – that of social media influencers – which led to the rapid surge in interest towards beauty brands stemming from aspirations of looking like or having gorgeous skin like a celebrity. What this also did was birth some global and regional powerhouse brands by the likes of said celebs such as Kylie Jenner (Kylie Cosmetics), Rihanna (Fenty Beauty), and the region’s very own Huda Kattan (Huda Beauty). And then a few years later, conversations about sustainability, organic items, ethics, cruelty-free products started gaining prominence where the demand from consumers saw the emergence of a range of beauty startups claiming to offer clean/organic/sustainable/cruelty-free products to its customers. Each trend added more brands, products and retailers to the cosmetics and personal care ecosystem.

And then came the pandemic when events were cancelled, work-from-home became the norm, and masks covering most of the face became the mandatory accessory for those who were going out. There were sentiments of dressing up too fancy (even if it was for a zoom call) didn’t seem appropriate and the love for comfort resurfaced. All this proved to be a clear indication that the “lipstick-effect”*, which has been exhibited in prior recessions, didn’t quite hold true this time around – at least not in 2020 and definitely not for lipsticks.

Leonard Lauder, chairman emeritus of Estée Lauder, coined the term “lipstick effect” in 2001 to describe the beauty company’s rising lipstick sales during periods of financial distress. The rationale given for the effect was that cash-strapped consumers turn to small indulgences as pick-me-ups when they can’t buy extravagant luxuries.

 Shifting sands: Beauty to skincare

However, few months into the pandemic, analysts started noticing a different kind of lipstick effect taking shape. Cash-strapped consumers were now turning to hygiene and personal care as small indulgences and even consistently investing in it.

The growth of the skincare market was a dominant topic during a recent Beautyworld Middle East webinar session hosted by Messe Frankfurt Middle East ahead the three-day event in October.

“The skincare market is expected to grow with a CAGR of 4% for the next five years. It is an extremely popular choice among consumers, and the focus on holistic health and maintaining healthy skin care practices are here to stay,” said Amna Abbas, Consultant, Beauty, Health and Fashion Middle East, Euromonitor International.

“Greater focus on self-care, as well as cleansing for safety and hygiene purposes, has led to regular regimes within skincare such as facial cleansing and regular moisturizing for maintaining skin health for the long run,” she said.

NPD, which tracks consumer spending and point-of-sale data, recorded that sales of luxury hand soap in France were up 800 percent the week of March 16, 2020, as the country went into lockdown. According to a report by McKinsey and Co, Zalando, Europe’s largest fashion and lifestyle e-commerce marketplace, reported a boom in pampering and self-care beauty categories, including candles, aromatherapy, and detox products; sales of skin-, nail-, and hair-care products were up 300 percent, year-on-year. That is consistent with results from Amazon, where sales for nail-care products (218 percent), hair coloring (172 percent), and bath-and-body products (65 percent) rose during the same period.

Glamazle.com is an online beauty store that started in 2015 where customers can find the world’s leading beauty and cosmetic brands at just one click.

“When the actual pandemic started in the first week of March, we were still doing 90% makeup and only 10% or fraction of sales from skincare, perfumes and the rest of the accessories. However, it took a massive shift, come the first week of April when the 24-hour lockdown happened. We were doing 60%-70% business only from skincare,” said Neelam Keswani, founder and Managing Director of Glamazle.

“We went into a nervous state where we did not know how we would fulfill these orders. Tech-wise we started getting updates from our system as well that the buying pattern is changing. So we actually did a lot of studies and within a week’s time we did a pivot and we stopped ordering makeup and moved to more skincare. We had a four-way cycle of ordering, which would be – order with the supplier, in transit, in the warehouse and on the way to the customer. So we had enough stock rotating and we actually met a lot of demand,” she added. 

Delving into data 

However, today what is the absolute game-changer for the beauty industry, as is for most industries, is technology.

“Initially, the e-commerce acceleration was predicted to happen over the next five years, however, due to the lockdown in 2020, the e-commerce boom accelerated in just three months. The pandemic accelerated the adoption of beauty and personal care e-commerce by brands and consumers alike, reaching a market size of USD 1.7 billion in the Middle East and Africa region in 2020,” said Amna Abbas.

“E-commerce is expected to grow over the next five years to reach USD 2.4 billion with a CAGR of 7%. This predicted growth is fostering the role and implementation of technology, and is being more frequently used by beauty brands and retailers alike to provide a holistic, seamless shopping experience whether in the comfort of consumers’ homes or physically, in-store,” she added.

In the Middle East, a few new beauty tech companies have sprouted in the last few years, which use data, emerging technologies and philosophies on clean beauty to cater to the regional demands. Secret Skin is one such company that launched nine months ago with a clear vision to be a leading sustainable beauty-tech platform that focuses on pure and conscious beauty and skincare products. The charter for Secret Skin was clear, to have a data-driven brand that recognises consumer behaviours and preferences engaging their audiences by aligning themselves with regional influencers and image drivers.

Beauty products are no longer standardised. With more skin diagnostic tools introduced, the beauty industry has advanced analysis across a variety of metrics, emphasising the rising appeal for hyper-personalised skincare products.

As a way to differentiate themselves from the competition, beauty brands are investing in technology as a way to attract consumers by emphasizing their innovations and expertise.

Personalization drives brand loyalty, better connecting with consumers by giving them modified products that they need, proving that beauty isn’t a one-size-fits-all industry.

 AR and VR

Once considered niche, AI, AR and VR have been gaining great traction with more beauty brands investing in the technology as a part of their wider marketing strategy. Pushing boundaries like never before, incorporating tech in beauty offers consumers and professionals an elevated beauty experience that is customized to their individual needs, smarter in every way, and better for the environment. Globally, a range of beauty conglomerates have been leading the way in incorporating these emerging technologies to gain tremendous leverage over those who are late to the game.

L’Oréal, for instance, uses ModiFace, which uses Artificial Intelligence and Augmented Reality. Their range of digital services include:

• SkinConsult AI Vichy – a skin aging algorithm developed with dermatologists to provide a personalized skincare recommendation.
• Makeup Virtual Try-on Maybelline – try makeup virtually before buying it online or in-store – a revolution in sampling and trying on products, especially during the pandemic when testing is restricted on direct skin.
• Garnier Hair Color Services: At-home access to color advice – provide recommendation for in-home hair color experience.
• La Roche-Posay Spots scan – an acne analyzer powered by AI and developed with dermatologists to provide recommendations for acne-prone skin.

More beauty stores are incorporating VR experiences into their e-commerce bringing physical retail to online shopping, adding a ‘walkthrough and explore’ product offering in a three-dimensional experience. Additionally, brands keep shoppers engaged through immersive virtual events hosted due to pandemic restrictions, such as game partnerships, online assessments, or even an online shopping showcase.

Retailers across the board would now have to reinvent and expand their horizons to offer customers an experience that would ‘wow’ them, encourage them to shop, as well as entertain and engage them in the process. A basic e-commerce presence and latent technology are no longer enough when innovation is the name of the game. ‘Phygital Reality’ is a hybrid of physical and virtual worlds where consumers can seamlessly work, shop and interact both in-person and online. The future will be where e-commerce exists along with stores, making the shopping experience holistic and seamless. Options such as browsing catalogues online, receiving product recommendations through AI and VR technology adoption, click and collect in-store options, etc., will ensure a smooth shopping experience, whether online or offline. The future is now and opportunities are ripe, so retail leaders would now need to get on board to be a part of this unfolding revolution in beauty.

Dubai is set to host the region’s largest international beauty industry trade fair from 5th October to 7th October, 2021 at the Dubai World Trade Centre, strengthening the emirate’s status as the region’s undisputed beauty capital.