Perspectives of Perfume Brand in the UAE Market - Essay Example

? Kilian perfume brand in the UAE market Macro-environmental Analysis 1 Economic United Arab Emirates is ranked as seventh largest oil producer in the world. It provides minimal restriction and encourages free economy that supports international trade, private sector activities and capital movement. The economy of UAE has proved to be resilient despite of the impact caused by the global economic downturn1. After the discovery of oil the country has undergone a rapid transformation from an impoverished region to a modern state with high living standard. The GDP per capita as on 2012 is $49,000 that positions it at rank 16 as compared to other countries2. 1.2 Demographic UAE is considered to have the world’s third best demographic profile after Qatar and Macau (China). According to the reports of the International Labour Organization a quarter of the population is estimated to be 4.8 million and is categorised under non-working age who are dependent either on their family members or on support from the government3. 1.3 Social and Cultural After Abu Dhabi started to export oil, the society of the country also started to transform. Emiratis are traditionally conservative but UAE is considered to one of the most liberal countries in the Gulf. Other believes and cultures are tolerated especially in Dubai4. 1.4 Technology UAE has spent about $5 billion (Dh 18.36 billion) as an investment towards technological upgradation. The main aim behind doing this was to make UAE the fastest growing region of the world in spending towards information technology5. 1.5 Political Politically the region remains authoritarian. Until 2006 it remained as the as the only country that do not have elected bodies. In 2012 restriction was introduced related to usage of internet. However the authority of UAE tries to reduce the dependency on oil export and diversify the economy by creating boom in the tourism, construction and business sector6. 2. Industry Analysis 2.1 Overview Fragrance Foundation Arabia has claimed that a significant growth has been marked by the regional and global fragrance industry and is seen to get almost double from US$ 17 billion in the year 2010 to US$ 33.5 billion by 2015. More specifically a research by Euromonitor International stated that UAE has witnessed a high-end sales growth of signature products at a compounded annual growth rate of 5.4% and reach AED663.5 million by 2014. The sale in the mass fragrance for the same period is also expected to be AED247.9 million7. This is a clear indication of that the market of UAE has a preference for luxury goods and more specifically high-end products. 2.2 Entry Barriers The major entry barriers are the competitors operating in the market like Clive Christian, Tom Ford and Yves Saint Laurent who are some of the prominent players in the oud-based fragrance market. In UAE there are 3000 brands operating8. 2.3 Trends The current trends suggests that previously about 70% of the business was dominated by oud-based perfume but now it has reduced to only 30% and rest are occidental perfumes9. As per the survey record of UAE Ministry of Economy the per month average household income of the residents is AED18,248.60. The report has also revealed that the AED11,241.20 is the average household expenditure of the resident in one month with most of the income spent on drinks and food10. The age structure of UAE is 20.6% of the total population is between the age group of 0-14 years (male 577,599 and female 551,346), 13.8% is between the age group of 15-24 years (male 449,258 and female 306,410), 61.5% is between the age group of 22-54 years (male 2,570,054 and female 798,070), 3.1% is between the age group of 55-64 years (male 127,569 and female 40,996) and only 1% is above 65 years (male 33,481 and female 19,189) as on 201311. 2.4 Success factors Lifestyle of the people has changed. Now they want to look good and in fact smell good. Strong economy has made the region and the fragrance sector more lucrative. Growth in the expat population also plays a major role in the success of this industry12. 3. Customer Analysis 3.1 Customer Segmentation The major consumer of premium perfume is the local population of the region. The tourist industry is also a major contributor towards the consumption of the luxury perfume. A major portion of the perfume market is occupied by the tourist owning to the duty-free sales in the malls, retail outlets, airports and other locations has increased the spending of this segment. The expatriate population are also seen to contribute towards the consumption of the perfume13. 3.2 Strategy The growth in the Middle East provides a huge untapped market to the international players. An increase in the willingness of men and women has been observed towards the use of outstanding brands that has enhanced the opportunity and image of the region. Moreover use of fragrance in the daily life is considered to be the integral part of the Arabian culture. The use of oil-based scents on the body is encouraged by the Arabian culture and is said to be associated with faith of Islam14. Therefore the people of UAE are seen to be more associated with the quality of the product since there are already huge segment dealing in perfumes like stores, supermarket, perfumeries, mono brands and large outlets. 3.3 Needs As the citizens of UAE have more disposable income and perfume is the integral part of their lifestyle so the spending on perfume is relatively higher than other parts of the world. Local and oriental fragrances have a major presence in the market of UAE that is huge consumer of Ittar, Oud and other native fragrances. The regional perfume houses are dealing in these perfumes but have also felt the need of designer and exotic fragrances15. Thus this signifies that the customers are now looking towards designer and exotic fragrances apart from the traditional perfumes. 3.4 Purchasing Behaviour The brand loyalty of the consumers depends upon the factors like product quality, price, brand name and store environment in case of cosmetic and perfumes. The demography of the region, fashionable trendsetter and young population with high disposable income has contributed towards the growth of the market and are looking for more exotic perfumes at reasonable price16. The customer can be retained by providing quality product that has long lasting and exotic aroma. The vendor selected by the customer is based on the requirement like quick availability, price and quality. Since in this case the perfume is a luxury good to the customer the quality and brand name plays the key role. Moreover about 80% of the residents of UAE like to explore the various options through the social networking site17. 4. Other Brands Owning to the increase demand for high end signature perfume, more and more international brands are getting attracted towards the market of UAE. The local population has more disposable income with them and they are now more conscious about looking good, living good and smelling good. This has contributed heavily towards attracting more brands towards UAE perfume market. The major challenge for this market is the launch of large amounts of brands in this region. While in the western countries there are 1000 brands but in the UAE there are more than 3000 brands. Perfumes are not only found in retail stores but are also available at supermarkets, perfumeries, mono brands and other large stores. Clive Christian, Tom Ford, Yves Saint Laurent are some of the perfume makers who have launched their products based on oud based fragrances. While the Western brands are embracing the woody Arabian smell, the regional players like Ajmal and Swiss Arabian are seen to turn towards the Western fragrances. Paris Gallery is another retailer of luxury goods and perfumes operating in UAE18. According to the local brand Ajmal whenever an international brand launches it perfumes it looks for A type fragrance and A type price. Ajmal look towards launching two types of perfumes both occidental and oriental. Under oriental one can find concentrate and Eau de Parfum. Along with this the price charged for these products also starts from a range of AED 75 to AED 500. Since the company caters to various segments so they ensure that one segment does not eat away the share of the other. But sometimes it is seen to happening so but still the company tries to avoid by keeping their price points considerably different19. Paris Gallery is a major retailer of luxury goods and perfumes in UAE. According to them the market of UAE is seen to demonstrate a high demand for the luxury products that are reasonably priced. The consumption is always seen to be high especially because of the shopping mall culture. Paris Gallery has nearly 26 outlets and are catering to about 60% high end demand for cosmetic and fragrance sales. They are expecting an increase in the growth by 20%20. It is planning to open 40 more retail outlets in Saudi Arabia, Qatar, UAE, Kuwait, Oman and Bahrain. However there is lack of presence of local manufacturer due to which more and more international firm are entering into the market of UAE21. Read More